State of Israel Bonds
Encyclopedia
State of Israel Bonds are debt securities issued by the Government of Israel.
State of Israel Bonds is also the more familiar name of the underwriter of the bonds in the United States. The company is officially known as Development Corporation for Israel (DCI). DCI is headquartered in New York City
, and is a broker-dealer
registered by the Financial Industry Regulatory Authority
(FINRA). DCI is also a member of the Securities Investor Protection Corporation
(SIPC).
On October 31, 2011, Israel Tapoohi
assumed responsibility as president and CEO of Development Corporation for Israel/Israel Bonds. Highly regarded for his private sector expertise and insights, Tapoohi has served as a top executive for Israel’s most prominent companies, including chairman of the board of Africa-Israel Investments and executive chairman of the board of Bezeq, Israel’s telecommunications provider and largest corporation.
The sale of Israel bonds has become global in scope. In addition to the United States, bonds are sold in Canada through Canada-Israel Securities, Ltd., and Latin America
and Europe
through Israel Bonds International. Sales have increased steadily since the initial Independence Issue, with total worldwide sales now exceeding $33 billion (http://www.israelbonds.com/Learn/History.aspx)
This year marks the 60th anniversary of the Bonds organization. In commemoration of the anniversary, Israel Bonds published its official history – Not Just A Bond: A Bond With Israel
, detailing the organization’s evolution into a worldwide, multi-billion dollar enterprise. In his foreword to the book, President Shimon Peres
hailed the creation of Israel Bonds as "a vital chapter in Israel’s history."
On September 19, 2011, the Bonds organization launched a new e-commerce site to facilitate purchasing Israel bonds online. Israel Bonds e-commerce site
, David Ben-Gurion
, in the aftermath of the 1948 Arab-Israeli War
. The war had taken a terrible toll in casualties (more than 1% of the country's population was killed), and the nation's fledgling economy was devastated.
Compounding the dire situation was the fact that Israel faced economic demands unique to the new state, most especially the arrival of hundreds of thousands of immigrants. In Israel's early years, immigrants generally fell into two categories: Holocaust
survivors and Jewish refugees from Arab
countries.
For Holocaust survivors, the journey to Mandate Palestine prior to Israel's independence had been extremely perilous. The British patrolled the coastline, maintained a blockade to prevent entry, stopped many ships, and sent the passengers to displaced persons camp
s in Europe. On May 15, 1948, the end of the British Mandate and the establishment of Israel removed all impediments to immigration. As a result, a large portion of the surviving remnant of European Jewry quickly set sail for Israel.
Meanwhile, Jews from throughout the Middle East, who fled, were expelled, or were rescued through missions such as Operation Magic Carpet
, added to the enormous influx of immigrants. Israel's chronic lack of funds forced the government to settle the wave of immigrants in primitive shelters. Food was scarce and strictly rationed.
With his country financially overwhelmed, Ben-Gurion turned to the Diaspora
community for help. In September 1950, he convened a meeting of American Jewish leaders at Jerusalem's King David Hotel
, where he proposed issuing bonds to help provide Israel with a more secure economic foundation. Ben-Gurion's goals were two-fold: to obtain millions of dollars in funding for immigrant absorption and the construction of national infrastructure, and to engage Diaspora Jewry as active partners in building the new Jewish state.
The American Jewish leaders supported Ben-Gurion's plan and, the following spring, the Israeli prime minister traveled to New York to help launch the inaugural Independence Issue at a gala Madison Square Garden
ceremony. Expectations for first-year sales were $25 million. Instead, final results for 1951 more than doubled projections, exceeding $52 million.
and National Water Carrier.
Within six years, according to an article in the January 21, 1957, issue of Time magazine
, "bond sales alone amount(ed) to an astonishing 35% of Israel's special development budget." The article quoted Foreign Minister
Golda Meir
, who emphatically stated, "the central role in building our economic strength has been played by Israel bonds."
, sales exceeded $250 million a mark that more than doubled during the Yom Kippur War
of 1973. From the mid-1980s to 1992, Israel bonds were the major source of external net borrowings by the Government of Israel. In 1991, the year of the Persian Gulf War
and Iraqi missile strikes on Israel, annual sales broke the $1 billion threshold.
s.
In 2004, the Bank of Israel
authorized a report “to describe the activity of the Israel Bonds organization over the past fifty years and to summarize changes that have taken place in the products the organization offers with respect to quantities, types of bonds and recruitment costs.” In doing so, the report noted, “an analysis of the sale of bonds indicates an increase in sales from one decade to the next.” It also observed that the Bonds organization has been market-responsive over the years, “so that each bond addressed a different target audience: individuals, communities (and) financial bodies.” The report concluded that Israel Bonds is “a uniquely Israeli establishment, and no other countries have a similar organization.” It stated that “(when) Israel has found it difficult to raise high sums of external debt, Israel Bonds has shown itself to be capable of reacting quickly to increased needs for foreign currency.”
In May 2008, the Israel Bonds organization was honored in Israel as part of a series of official events celebrating the nation’s 60th anniversary. Held at the Knesset and hosted by Speaker Dalia Itzik
, with the participation of Prime Minister Ehud Olmert
and Finance Minister Roni Bar-On
, the tribute saluted the singular role the Bonds organization played in building, developing and strengthening Israel’s economy. By year's end, worldwide sales reached $1.044 billion, and Israel's Finance Ministry subsequently asked the organization to secure an additional $1 billion in 2009.
On September 16, 2009, Israeli Finance Minister Yuval Steinitz
paid a visit to Israel Bonds headquarters to express personal appreciation for the organization's efforts.
At the conclusion of 2009, then-president & CEO Joshua Matza reported to Finance Minister Steinitz that Israel Bonds achieved $1.2 billion in worldwide sales, exceeding its goal by $200 million. In congratulatory remarks, Zvi Chalamish
, chief fiscal officer for the Western Hemisphere, said the dependable support provided by Israel Bonds makes it easier for Israel to raise foreign capital and secure investment grade ratings from international credit agencies.
In 2010, Israel Bonds once again exceeded its Finance Ministry goal of $1 billion, securing $1.255 billion in worldwide sales. http://www.israelbonds.com/israelbonds/HQ_CONTENTS/HQ_pages/current_events/whats_new.aspx
Rates for Israel bonds are established four times per month except Mazel Tov Bonds, which are determined monthly. Interest for fixed rate bonds is based on prevailing Treasury bond rates, plus a spread. Rates for floating rate bonds are equal to the 6-month LIBOR rate in effect on the initial determination date, plus or minus a spread that remains fixed until maturity.
According to Israel's Finance Ministry, "Israel has never defaulted in the payment of principal or interest on any of its internal or external indebtedness." According to the Congressional Research Service
of the Library of Congress
, as of 2002, approximately $40 billion in loans to Israel by the United States Government have waived by the United States Government, rather than repaid by Israel.
Capital is raised through the following four organizations: Development Corporation for Israel (US), Israel Bonds International (Europe and Latin America), Development Company for Israel (UK) Ltd., and Canada-Israel Securities Limited.
Computershare
acts as fiscal agent for the bonds. Historically the bonds have not generally been freely transferable. Israel expects to continue to issue the bonds in the future. Redemption of Israel Bonds requires a new W-9 form to be submitted with the bond, and redemption checks often take over a month to be issued.
Purchasers now include more than 1,700 labor unions, over 1,800 foundation
s, and numerous states, municipalities, corporations, insurance companies, associations, union pension fund
s, banks, financial institution
s, universities, synagogue
s, and private investors. Over 70 state and municipal public employee pension and treasury funds have invested more than $1 billion in the bonds.
2010 was a record year for state and municipal investments, with $143 million in purchases, including Maryland and Ohio, $20 million each; New York City, $15 million; Florida, Illinois, Oklahoma and South Carolina, $10 million; Texas, $8 million; Indiana, Massachusetts, New York State and Palm Beach County, $5 million; and Georgia, $2 million.
(FSA), which regulates the financial services industry in the UK. UK bond sales increased tenfold in 2000–04, reaching a record $100 million in 2004.
More recently, capital raised through the sale of the bonds has been used for undertakings such as:
Israel bonds will also help fund development of the Negev
desert, Israel's largest remaining open area, comprising approximately half the country's land mass. In addition, plans are underway for industrial park
s in the Galilee
to further expand Israel's hi-tech sector.
State of Israel Bonds is also the more familiar name of the underwriter of the bonds in the United States. The company is officially known as Development Corporation for Israel (DCI). DCI is headquartered in New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
, and is a broker-dealer
Broker-dealer
A broker-dealer is a term used in United States financial services regulations. It is a natural person, a company or other organization that trades securities for its own account or on behalf of its customers....
registered by the Financial Industry Regulatory Authority
Financial Industry Regulatory Authority
In the United States, the Financial Industry Regulatory Authority, Inc., or FINRA, is a private corporation that acts as a self-regulatory organization . FINRA is the successor to the National Association of Securities Dealers, Inc. ...
(FINRA). DCI is also a member of the Securities Investor Protection Corporation
Securities Investor Protection Corporation
The Securities Investor Protection Corporation is a federally mandated, non-profit, member-funded, corporation in the United States. It protects investors in certain securities from financial harm if a broker-dealer fails...
(SIPC).
On October 31, 2011, Israel Tapoohi
Israel Tapoohi
Israel "Izzy" Tapoohi is the President and Chief Executive Officer of Development Corporation for Israel . He is an Israeli executive and an accountant, by profession. He has held director positions on the boards of numerous Israeli and international companies and has recently been involved with...
assumed responsibility as president and CEO of Development Corporation for Israel/Israel Bonds. Highly regarded for his private sector expertise and insights, Tapoohi has served as a top executive for Israel’s most prominent companies, including chairman of the board of Africa-Israel Investments and executive chairman of the board of Bezeq, Israel’s telecommunications provider and largest corporation.
The sale of Israel bonds has become global in scope. In addition to the United States, bonds are sold in Canada through Canada-Israel Securities, Ltd., and Latin America
Latin America
Latin America is a region of the Americas where Romance languages – particularly Spanish and Portuguese, and variably French – are primarily spoken. Latin America has an area of approximately 21,069,500 km² , almost 3.9% of the Earth's surface or 14.1% of its land surface area...
and Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
through Israel Bonds International. Sales have increased steadily since the initial Independence Issue, with total worldwide sales now exceeding $33 billion (http://www.israelbonds.com/Learn/History.aspx)
This year marks the 60th anniversary of the Bonds organization. In commemoration of the anniversary, Israel Bonds published its official history – Not Just A Bond: A Bond With Israel
Not Just A Bond: A Bond With Israel
Not Just A Bond: A Bond With Israel, published October 18, 2010 by Talpiot Press, is a historical account of the founding, growth and expansion of the Development Corporation for Israel/State of Israel Bonds operation, which today is a global enterprise with cumulative worldwide sales exceeding .In...
, detailing the organization’s evolution into a worldwide, multi-billion dollar enterprise. In his foreword to the book, President Shimon Peres
Shimon Peres
GCMG is the ninth President of the State of Israel. Peres served twice as the eighth Prime Minister of Israel and once as Interim Prime Minister, and has been a member of 12 cabinets in a political career spanning over 66 years...
hailed the creation of Israel Bonds as "a vital chapter in Israel’s history."
On September 19, 2011, the Bonds organization launched a new e-commerce site to facilitate purchasing Israel bonds online. Israel Bonds e-commerce site
1950 to 1951
The idea to float bonds issued by Israel's government was conceived by Israel's first Prime MinisterPrime Minister of Israel
The Prime Minister of Israel is the head of the Israeli government and the most powerful political figure in Israel . The prime minister is the country's chief executive. The official residence of the prime minister, Beit Rosh Hamemshala is in Jerusalem...
, David Ben-Gurion
David Ben-Gurion
' was the first Prime Minister of Israel.Ben-Gurion's passion for Zionism, which began early in life, led him to become a major Zionist leader and Executive Head of the World Zionist Organization in 1946...
, in the aftermath of the 1948 Arab-Israeli War
1948 Arab-Israeli War
The 1948 Arab–Israeli War, known to Israelis as the War of Independence or War of Liberation The war commenced after the termination of the British Mandate for Palestine and the creation of an independent Israel at midnight on 14 May 1948 when, following a period of civil war, Arab armies invaded...
. The war had taken a terrible toll in casualties (more than 1% of the country's population was killed), and the nation's fledgling economy was devastated.
Compounding the dire situation was the fact that Israel faced economic demands unique to the new state, most especially the arrival of hundreds of thousands of immigrants. In Israel's early years, immigrants generally fell into two categories: Holocaust
The Holocaust
The Holocaust , also known as the Shoah , was the genocide of approximately six million European Jews and millions of others during World War II, a programme of systematic state-sponsored murder by Nazi...
survivors and Jewish refugees from Arab
Arab
Arab people, also known as Arabs , are a panethnicity primarily living in the Arab world, which is located in Western Asia and North Africa. They are identified as such on one or more of genealogical, linguistic, or cultural grounds, with tribal affiliations, and intra-tribal relationships playing...
countries.
For Holocaust survivors, the journey to Mandate Palestine prior to Israel's independence had been extremely perilous. The British patrolled the coastline, maintained a blockade to prevent entry, stopped many ships, and sent the passengers to displaced persons camp
Displaced persons camp
A displaced persons camp or DP camp is a temporary facility for displaced persons coerced into forced migration. The term is mainly used for camps established after World War II in West Germany and in Austria, as well as in the United Kingdom, primarily for refugees from Eastern Europe and for the...
s in Europe. On May 15, 1948, the end of the British Mandate and the establishment of Israel removed all impediments to immigration. As a result, a large portion of the surviving remnant of European Jewry quickly set sail for Israel.
Meanwhile, Jews from throughout the Middle East, who fled, were expelled, or were rescued through missions such as Operation Magic Carpet
Operation Magic Carpet (Yemen)
Operation Magic Carpet is a widely-known nickname for Operation On Wings of Eagles , an operation between June 1949 and September 1950 that brought 49,000 Yemenite Jews to the new state of Israel. British and American transport planes made some 380 flights from Aden, in a secret operation that was...
, added to the enormous influx of immigrants. Israel's chronic lack of funds forced the government to settle the wave of immigrants in primitive shelters. Food was scarce and strictly rationed.
With his country financially overwhelmed, Ben-Gurion turned to the Diaspora
Diaspora
A diaspora is "the movement, migration, or scattering of people away from an established or ancestral homeland" or "people dispersed by whatever cause to more than one location", or "people settled far from their ancestral homelands".The word has come to refer to historical mass-dispersions of...
community for help. In September 1950, he convened a meeting of American Jewish leaders at Jerusalem's King David Hotel
King David Hotel
The King David Hotel is a 5-star hotel in Jerusalem, Israel. Opened in 1931, the hotel was built with locally quarried pink limestone and was founded by Ezra Mosseri, a wealthy Egyptian Jewish Banker. To this day the hotel remains one of the most prominent and prestigious hotels in Israel, and...
, where he proposed issuing bonds to help provide Israel with a more secure economic foundation. Ben-Gurion's goals were two-fold: to obtain millions of dollars in funding for immigrant absorption and the construction of national infrastructure, and to engage Diaspora Jewry as active partners in building the new Jewish state.
The American Jewish leaders supported Ben-Gurion's plan and, the following spring, the Israeli prime minister traveled to New York to help launch the inaugural Independence Issue at a gala Madison Square Garden
Madison Square Garden
Madison Square Garden, often abbreviated as MSG and known colloquially as The Garden, is a multi-purpose indoor arena in the New York City borough of Manhattan and located at 8th Avenue, between 31st and 33rd Streets, situated on top of Pennsylvania Station.Opened on February 11, 1968, it is the...
ceremony. Expectations for first-year sales were $25 million. Instead, final results for 1951 more than doubled projections, exceeding $52 million.
1952 to 1966
The new organization increasingly expanded operations throughout the US and Canada, providing proceeds utilized to help fund projects in Israel's industrial and agricultural sectors, including the Dead Sea WorksDead Sea Works
The Dead Sea Works is an Israeli potash plant in Sdom, on the Dead Sea coast of Israel.-History:The company was established in 1930 by Moshe Novomeysky. It was known then as the Palestine Potash Company...
and National Water Carrier.
Within six years, according to an article in the January 21, 1957, issue of Time magazine
Time (magazine)
Time is an American news magazine. A European edition is published from London. Time Europe covers the Middle East, Africa and, since 2003, Latin America. An Asian edition is based in Hong Kong...
, "bond sales alone amount(ed) to an astonishing 35% of Israel's special development budget." The article quoted Foreign Minister
Foreign Affairs Minister of Israel
The Foreign Affairs Minister of Israel is the political head of the Israeli Ministry of Foreign Affairs. The position is one of the most important in the Israeli cabinet after Prime Minister and Defense Minister...
Golda Meir
Golda Meir
Golda Meir ; May 3, 1898 – December 8, 1978) was a teacher, kibbutznik and politician who became the fourth Prime Minister of the State of Israel....
, who emphatically stated, "the central role in building our economic strength has been played by Israel bonds."
1967 to 1992
Over subsequent decades, sales continued to increase, particularly during times of crisis. During 1967's Six-Day WarSix-Day War
The Six-Day War , also known as the June War, 1967 Arab-Israeli War, or Third Arab-Israeli War, was fought between June 5 and 10, 1967, by Israel and the neighboring states of Egypt , Jordan, and Syria...
, sales exceeded $250 million a mark that more than doubled during the Yom Kippur War
Yom Kippur War
The Yom Kippur War, Ramadan War or October War , also known as the 1973 Arab-Israeli War and the Fourth Arab-Israeli War, was fought from October 6 to 25, 1973, between Israel and a coalition of Arab states led by Egypt and Syria...
of 1973. From the mid-1980s to 1992, Israel bonds were the major source of external net borrowings by the Government of Israel. In 1991, the year of the Persian Gulf War
Gulf War
The Persian Gulf War , commonly referred to as simply the Gulf War, was a war waged by a U.N.-authorized coalition force from 34 nations led by the United States, against Iraq in response to Iraq's invasion and annexation of Kuwait.The war is also known under other names, such as the First Gulf...
and Iraqi missile strikes on Israel, annual sales broke the $1 billion threshold.
1993 to 2010
Annual sales remained at $1 billion or above as Israel bonds became increasingly viewed not only as a means of supporting Israel, but as a useful financial investment as well, particularly for pension fundPension fund
A pension fund is any plan, fund, or scheme which provides retirement income.Pension funds are important shareholders of listed and private companies. They are especially important to the stock market where large institutional investors dominate. The largest 300 pension funds collectively hold...
s.
In 2004, the Bank of Israel
Bank of Israel
The Bank of Israel is the central bank of Israel. It is located in Kiryat HaMemshala in Israel's capital city of Jerusalem, with a branch office in Tel Aviv. The current governor is Stanley Fischer.-History:...
authorized a report “to describe the activity of the Israel Bonds organization over the past fifty years and to summarize changes that have taken place in the products the organization offers with respect to quantities, types of bonds and recruitment costs.” In doing so, the report noted, “an analysis of the sale of bonds indicates an increase in sales from one decade to the next.” It also observed that the Bonds organization has been market-responsive over the years, “so that each bond addressed a different target audience: individuals, communities (and) financial bodies.” The report concluded that Israel Bonds is “a uniquely Israeli establishment, and no other countries have a similar organization.” It stated that “(when) Israel has found it difficult to raise high sums of external debt, Israel Bonds has shown itself to be capable of reacting quickly to increased needs for foreign currency.”
In May 2008, the Israel Bonds organization was honored in Israel as part of a series of official events celebrating the nation’s 60th anniversary. Held at the Knesset and hosted by Speaker Dalia Itzik
Dalia Itzik
Dalia Itzik , born 20 October 1952, is an Israeli politician who currently serves as a member of the Knesset for Kadima. She has previously served in several ministerial positions, and on 4 May 2006 became the first female speaker of the Knesset, and has since served as President of Israel in an...
, with the participation of Prime Minister Ehud Olmert
Ehud Olmert
Ehud Olmert is an Israeli politician and lawyer. He served as Prime Minister of Israel from 2006 to 2009, as a Cabinet Minister from 1988 to 1992 and from 2003 to 2006, and as Mayor of Jerusalem from 1993 to 2003....
and Finance Minister Roni Bar-On
Roni Bar-On
Roni Bar-On is an Israeli politician and lawyer. He currently serves as a member of the Knesset for Kadima and is a former Minister of Finance.-Biography:...
, the tribute saluted the singular role the Bonds organization played in building, developing and strengthening Israel’s economy. By year's end, worldwide sales reached $1.044 billion, and Israel's Finance Ministry subsequently asked the organization to secure an additional $1 billion in 2009.
On September 16, 2009, Israeli Finance Minister Yuval Steinitz
Yuval Steinitz
Yuval Steinitz , is an Israeli academic and politician who has been a Knesset member for Likud since 1999. He is now the Finance Minister of Israel.-Biography:...
paid a visit to Israel Bonds headquarters to express personal appreciation for the organization's efforts.
At the conclusion of 2009, then-president & CEO Joshua Matza reported to Finance Minister Steinitz that Israel Bonds achieved $1.2 billion in worldwide sales, exceeding its goal by $200 million. In congratulatory remarks, Zvi Chalamish
Zvi Chalamish
Zvi Chalamish is, since 2005, Consul and Chief Fiscal Officer of Israel's Ministry of Finance for North America.Chalamish graduated from Hebrew University of Jerusalem with a B.A. in Economics and Accounting, and an MBA in Finance and Accounting. He is also a CPA...
, chief fiscal officer for the Western Hemisphere, said the dependable support provided by Israel Bonds makes it easier for Israel to raise foreign capital and secure investment grade ratings from international credit agencies.
In 2010, Israel Bonds once again exceeded its Finance Ministry goal of $1 billion, securing $1.255 billion in worldwide sales. http://www.israelbonds.com/israelbonds/HQ_CONTENTS/HQ_pages/current_events/whats_new.aspx
Securities
Initially, State of Israel Bonds offered one security. As the program became increasingly successful, multiple investment options were made available. The following bonds are currently offered:- Jubilee Issue Bonds – fixed rate 2, 3, 5 and 10-year bonds; $25,000 minimum investment and $5,000 multiples. Interest is paid semi-annually on May 1 and November 1.
- Maccabee Issue Bonds – fixed rate 2, 3 and 5-year bonds; $5,000 minimum investment and $1,000 multiples. Interest is paid semi-annually on May 1 and November 1.
- Sabra Savings Bonds – fixed rate 3-year bonds; $1,000 minimum investment and $500 multiples. Interest paid upon maturity.
- Mazel Tov Bonds – fixed rate 5-year bonds; $100 minimum investment and $50 multiples, limited to $2500 per day for each purchaser and holder. Interest paid upon maturity.
- Floating Rate LIBOR Bonds – variable rate 2, 3 and 5-year bonds; $5,000 minimum investment and $2,500 multiples; interest paid semi-annually on June 1 and December 1.
Rates for Israel bonds are established four times per month except Mazel Tov Bonds, which are determined monthly. Interest for fixed rate bonds is based on prevailing Treasury bond rates, plus a spread. Rates for floating rate bonds are equal to the 6-month LIBOR rate in effect on the initial determination date, plus or minus a spread that remains fixed until maturity.
According to Israel's Finance Ministry, "Israel has never defaulted in the payment of principal or interest on any of its internal or external indebtedness." According to the Congressional Research Service
Congressional Research Service
The Congressional Research Service , known as "Congress's think tank", is the public policy research arm of the United States Congress. As a legislative branch agency within the Library of Congress, CRS works exclusively and directly for Members of Congress, their Committees and staff on a...
of the Library of Congress
Library of Congress
The Library of Congress is the research library of the United States Congress, de facto national library of the United States, and the oldest federal cultural institution in the United States. Located in three buildings in Washington, D.C., it is the largest library in the world by shelf space and...
, as of 2002, approximately $40 billion in loans to Israel by the United States Government have waived by the United States Government, rather than repaid by Israel.
Capital is raised through the following four organizations: Development Corporation for Israel (US), Israel Bonds International (Europe and Latin America), Development Company for Israel (UK) Ltd., and Canada-Israel Securities Limited.
Computershare
Computershare
Founded in Melbourne, Australia in 1978, Computershare Limited has grown to become the world's largest share registry business. It is a leading financial market services and technology provider, employing over 10,000 people, providing services in 20 countries and to more than 30,000 clients and...
acts as fiscal agent for the bonds. Historically the bonds have not generally been freely transferable. Israel expects to continue to issue the bonds in the future. Redemption of Israel Bonds requires a new W-9 form to be submitted with the bond, and redemption checks often take over a month to be issued.
Investment grade ratings
The following international agencies have assigned Israel investment-grade ratings:- On August 8, 2011 Standard & Poor'sStandard & Poor'sStandard & Poor's is a United States-based financial services company. It is a division of The McGraw-Hill Companies that publishes financial research and analysis on stocks and bonds. It is well known for its stock-market indices, the US-based S&P 500, the Australian S&P/ASX 200, the Canadian...
affirmed Israel's A/A-1 sovereign credit rating, with an outlook of 'stable.' http://www.globes.co.il/serveen/globes/docview.asp?did=1000671752&fid=1725
- In a credit opinion issued February 9, 2011, Moody's Investors Service reconfirmed Israel's government foreign and local currency bond ratings at A1, as well as its 'stable' outlook on Israel's sovereign rating. Moody's has praised Israel Bonds as a source of funding ‘at favorable costs,’ highlighting the dependability of the Bonds organization ‘especially during times of domestic or regional conflict.’
- On February 11, 2008, Fitch RatingsFitch RatingsThe Fitch Group is a majority-owned subsidiary of FIMALAC, headquartered in Paris. Fitch Ratings, Fitch Solutions and Algorithmics, are part of the Fitch Group....
upgraded Israel's foreign currency Issuer Default Rating to A and local currency Issuer Default Rating to A+. The outlook for both ratings is 'stable.' Israel's short-term foreign currency rating was reaffirmed at F1. The country ceiling was upgraded to AA-.
Investors
Initial investors in Israel bonds were largely members of the Jewish community who wanted to help Israel strengthen its economic foundations. However, as securities became more diverse and market-responsive, the investor base became increasingly widespread. Israel bonds were seen as a two-fold investment that not only helped Israel, but were a useful means of portfolio diversification.Purchasers now include more than 1,700 labor unions, over 1,800 foundation
Foundation (charity)
A foundation is a legal categorization of nonprofit organizations that will typically either donate funds and support to other organizations, or provide the source of funding for its own charitable purposes....
s, and numerous states, municipalities, corporations, insurance companies, associations, union pension fund
Pension fund
A pension fund is any plan, fund, or scheme which provides retirement income.Pension funds are important shareholders of listed and private companies. They are especially important to the stock market where large institutional investors dominate. The largest 300 pension funds collectively hold...
s, banks, financial institution
Financial institution
In financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries...
s, universities, synagogue
Synagogue
A synagogue is a Jewish house of prayer. This use of the Greek term synagogue originates in the Septuagint where it sometimes translates the Hebrew word for assembly, kahal...
s, and private investors. Over 70 state and municipal public employee pension and treasury funds have invested more than $1 billion in the bonds.
State purchases
Over 65 state and municipal governments have invested in Israel to date. States include California, Connecticut, Florida, Georgia, Illinois, Indiana, Louisiana, Massachusetts, Maryland, Michigan, Minnesota, Missouri, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Texas, and Wisconsin.2010 was a record year for state and municipal investments, with $143 million in purchases, including Maryland and Ohio, $20 million each; New York City, $15 million; Florida, Illinois, Oklahoma and South Carolina, $10 million; Texas, $8 million; Indiana, Massachusetts, New York State and Palm Beach County, $5 million; and Georgia, $2 million.
United Kingdom
Development Company for Israel (UK) Ltd, trading as State of Israel Bonds UK, was established in 1981. It is a UK-registered company offering State of Israel bonds, and is regulated by the Financial Services AuthorityFinancial Services Authority
The Financial Services Authority is a quasi-judicial body responsible for the regulation of the financial services industry in the United Kingdom. Its board is appointed by the Treasury and the organisation is structured as a company limited by guarantee and owned by the UK government. Its main...
(FSA), which regulates the financial services industry in the UK. UK bond sales increased tenfold in 2000–04, reaching a record $100 million in 2004.
Projects
Proceeds from the sale of the bonds are designated by Israel's Finance Ministry for economic development projects, many of which were essential to solidifying Israel's post-independence economy. They included:- The National Water Carrier, which irrigated nearly half a million acres (4,000 km²), allowing Israel to become agriculturally self-sufficient;
- The Dead Sea WorksDead Sea WorksThe Dead Sea Works is an Israeli potash plant in Sdom, on the Dead Sea coast of Israel.-History:The company was established in 1930 by Moshe Novomeysky. It was known then as the Palestine Potash Company...
, which extracted potashPotashPotash is the common name for various mined and manufactured salts that contain potassium in water-soluble form. In some rare cases, potash can be formed with traces of organic materials such as plant remains, and this was the major historical source for it before the industrial era...
and bromineBromineBromine ") is a chemical element with the symbol Br, an atomic number of 35, and an atomic mass of 79.904. It is in the halogen element group. The element was isolated independently by two chemists, Carl Jacob Löwig and Antoine Jerome Balard, in 1825–1826...
and became Israel's first major industrial complex; - PortPortA port is a location on a coast or shore containing one or more harbors where ships can dock and transfer people or cargo to or from land....
development and expansion in Ashdod, HaifaHaifaHaifa is the largest city in northern Israel, and the third-largest city in the country, with a population of over 268,000. Another 300,000 people live in towns directly adjacent to the city including the cities of the Krayot, as well as, Tirat Carmel, Daliyat al-Karmel and Nesher...
, and Eilat, opening up export gateways to Europe, Asia, and Africa; and - The HaderaHaderaHadera is a city located in the Haifa District of Israel approximately from the major cities of Tel Aviv and Haifa. The city is located along of the Israeli Mediterranean Coastal Plain...
power plant, which helped alleviate Israel's lack of energy resources.
More recently, capital raised through the sale of the bonds has been used for undertakings such as:
- The building of homes and creation of jobs for hundreds of thousands of Jews who made aliyahAliyahAliyah is the immigration of Jews to the Land of Israel . It is a basic tenet of Zionist ideology. The opposite action, emigration from Israel, is referred to as yerida . The return to the Holy Land has been a Jewish aspiration since the Babylonian exile...
from the former Soviet UnionSoviet UnionThe Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....
and EthiopiaEthiopiaEthiopia , officially known as the Federal Democratic Republic of Ethiopia, is a country located in the Horn of Africa. It is the second-most populous nation in Africa, with over 82 million inhabitants, and the tenth-largest by area, occupying 1,100,000 km2...
during the massive wave of immigration throughout the 1990s; - Ben-Gurion International Airport expansion;
- Extending Israel's rail networkIsrael RailwaysIsrael Railways is the principal passenger railway operating company in Israel, and is responsible for all inter-city and suburban rail way passenger and freight traffic in the country. All its lines are standard gauge. The network is centered in Israel's densely populated coastal plain, from...
; - Improving the national highway system;
- Strengthening the national infrastructureInfrastructureInfrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function...
; and - DesalinationDesalinationDesalination, desalinization, or desalinisation refers to any of several processes that remove some amount of salt and other minerals from saline water...
plants.
Israel bonds will also help fund development of the Negev
Negev
The Negev is a desert and semidesert region of southern Israel. The Arabs, including the native Bedouin population of the region, refer to the desert as al-Naqab. The origin of the word Neghebh is from the Hebrew root denoting 'dry'...
desert, Israel's largest remaining open area, comprising approximately half the country's land mass. In addition, plans are underway for industrial park
Industrial park
An industrial park is an area zoned and planned for the purpose of industrial development...
s in the Galilee
Galilee
Galilee , is a large region in northern Israel which overlaps with much of the administrative North District of the country. Traditionally divided into Upper Galilee , Lower Galilee , and Western Galilee , extending from Dan to the north, at the base of Mount Hermon, along Mount Lebanon to the...
to further expand Israel's hi-tech sector.