Strategic analysts at JP Morgan said that Israel will witness the largest increase in the issuance of Treasury bonds by 4 times to 83 billion shekels ($22.11 billion) this year, up from 19 billion shekels ($5.06 billion) in 2023, as a result of the repercussions of its war on… Gaza Strip, which has been ongoing for 108 days.
The bank said in a memorandum issued on Tuesday that it based its estimates on Israel’s amended budget last week.
Israel increased spending in its 2024 budget by 55 billion shekels ($14.7 billion) in light of the war it is waging.
Israel expects the budget deficit for the current year to increase by 6.6% of GDP.
According to the Israeli government, the war on Gaza, which began on October 7, will lead to a decline in economic growth for the current year by 1.1 percentage points, after expected losses of 1.4 percentage points last year.
The financial impact of the war is estimated at about 150 billion shekels ($40.25 billion) in the period 2023-2024, assuming the war ends in the first quarter of the year.
“We believe that local investors such as pension funds and commercial banks have ample room to absorb the high net issuances,” JP Morgan analysts said in a note.
Increased bond issuance
Regarding the reality of bonds in Europe, the Middle East and Africa in general, the bank said that the issuance of local government bonds is expected to rise to $118 billion in 2024 thanks to the large supply in Israel and Turkey amid the widening budget deficit.
The bank said net domestic bond issuance could rise by about 40% from $85 billion in 2023 across the three regions.
The supply of Turkish bonds is expected to rise twice to 1,453 billion liras ($47.99 billion) in 2024, up from 732 billion liras ($24.18 billion) in 2023, with spending related to the earthquake and municipal elections keeping the country’s budget under pressure.
JPMorgan noted that Turkey has recently shifted towards raising interest rates, which has increased foreign investors’ interest in its local government bonds.
