About ISRAEL BONDS - Development Corporation for Israel
ISRAEL BONDS, Development Corporation for Israel ISRAEL BONDS - Development Corporation for Israel The Development Corporation for Israel, commonly known as Israel Bonds, is the broker-dealer and underwriter for securities issued by the state of Israel. Israel Bonds was established by Prime Minister David Ben-Gurion in the United States in May 1951, at a time when the country was in desperate need of an infusion of financial resources. Since then the organisation has become global in scale with Israel Bond offices now operating in Canada, Europe and Latin America. Since 1951 worldwide sales of Israel Bonds have surpassed 36 billion dollars, and in 2013 alone US domestic sales exceeded 1.12 billion dollars. The majority of purchases come from the diaspora community with retail clients, individuals, and Jewish organisations comprising of about 75% of worldwide sales, the remaining 25% encompasses institutional investors including States, municipalities, financial institutions, and corporations, who have all invested large sums in Israel bonds. The sale of bonds has had a substantial impact of Israel’s development, helping strengthen Israel’s economy and enabling national infrastructure development. From its launching in 1951 and continuing through the present day the, Israel Bonds organization has played a unique role in Israel’s rapid progression from struggling agrarian nation to global economic powerhouse. Proceeds realized through the sale of Israel bonds have helped cultivate the desert, build transportation networks, create new industries, resettle immigrants, and increase export capability. Today, investing in Israel bonds supports a nation of extraordinary innovation that continues to push the boundaries of modern technology. Israel Bonds has been widely praised for its extraordinary legacy of achievement. In the words of statesman Shimon Peres, "The investment of Israel bonds in Israel's economy has reaped huge dividends." What is Development Corporation for Israel/Israel Bonds? Development Corporation for Israel, established in 1951 and commonly known as Israel Bonds, is the broker-dealer and underwriter for securities - Israel bonds - issued by the State of Israel in the United States. In 2013 and 2014, U.S. domestic sales exceeded $1.1 billion. Worldwide Israel bond sales since the first issue in 1951 are approaching $40 billion. Are Israel bonds reliable investments? Investors value Israel’s impeccable record of having never defaulted on payment of principal or interest on Israel bonds. Thus, at a time of continued volatility in financial markets, Israel bonds are recognized as reliable investments. Back-to-back U.S. sales exceeding $1.1 billion underscore widespread acceptance of Israel bonds as important additions to investment portfolios, dispelling, once and for all, outdated misconceptions of Israel bonds as “charity.” Who invests in Israel bonds? Retail clients – individuals and Jewish organizations – comprise approximately 75% of worldwide sales. The remaining 25% encompasses institutional investors, including states, municipalities, financial institutions, corporations, foundations and others. How valuable is the Israel Bonds client base? Throughout the years, Israel Bonds has successfully developed a sizeable, diverse client base even the largest financial firms would envy. Why are Israel Bonds institutional investors significant? The Bonds organization’s client base is augmented by high profile institutional investors who make substantial Israel bond investments. The immediate name recognition of these investors gives Bonds retail clients assurance they are making the same investment as institutions with the highest fiduciary standards. How strong is Israel’s economy, given the fact that the global economy continues to be unstable? Israel’s economy is dynamic, full of innovative spirit and groundbreaking entrepreneurship, and currently well-positioned to outpace most other developed nations, particularly with the multi-billion dollar revenue stream being generated through its massive natural gas fields. Investing in Israel bonds is a means of becoming a stakeholder in one of the world’s most resilient economies. How have Israel bond sales impacted Israel’s development? Proceeds from the sale of bonds have played a decisive role in Israel’s rapid evolution into a groundbreaking, globally emulated leader in high-tech, cleantech and biotech. Israel bond capital has helped strengthen every aspect of Israel’s economy, enabling national infrastructure development. Today, expanded ports and transportation networks enabled by investments in Israel bonds help facilitate shipment of ‘Made in Israel’ technology around the world, enhancing national export growth. Are Israel bonds necessary under normal economic conditions? Israel’s Treasury endeavors not to raise funds more than once a year in order to maintain fiscal credibility with financial markets and ratings agencies. When the Treasury does issue bonds in overseas public markets, they are usually long bonds with 10-year maturities. Securities offered by the Bonds organization complement Treasury-issued bonds by including short and medium-term maturities that are sold on a daily basis. Are Israel bonds bought in large numbers only when Israel faces a crisis? Surpassing $1.1 billion in U.S. sales for the first time in 2013 occurred in a year without major conflict, countering perceptions that Israel bonds are bought in great numbers only when Israel confronts a national emergency. The record-breaking year can be attributed to recognition of the value of investing in Israel bonds, and, especially, confidence in the Israeli economy. The accomplishments of the last two years highlight the success the Bonds organization has had in shifting the narrative from the geopolitical to the economic. If there were a crisis, could Israel turn to capital markets? While Israel successfully utilizes public markets for debt financing, it almost certainly would not be able to rely solely on these markets in times of economic or security challenge. Under either of those circumstances, it is more than likely Israel’s credit rating would drop, and, as a result, the cost of financing through capital markets could become prohibitively expensive. Can Israel rely on commercial bank financing in times of economic or security challenges? Were Israel not to have access to the Israel Bonds client base and urgently need to re-establish it, the cost of securing necessary interim credit lines from commercial banks would be substantial. Regional conflict could also lead to credit lines not being extended to Israel. What about economic assistance from the United States? Although the U.S. is Israel’s staunchest ally, its continuing economic difficulties and debt burden would make it challenging to reinstitute a significant civilian aid program for Israel during a crisis. Who comprises Israel Bonds’ human capital? The Bonds organization is comprised of a professional team with a unique skill set. Similar to the staff of leading financial firms, Israel Bonds human capital is a valuable corporate resource. If Israel Bonds did not exist, could Israel quickly create a similar capital-raising operation in the U.S. during a national emergency? Attempting to create the Bonds sales and management team during a national emergency would take at least 18 months due to financial industry regulations and required examinations. Obviously, the idea of Israel trying to withstand an economic and security crisis for 18 months is inconceivable. Could another brokerage firm secure capital as effectively as the Bonds organization? Were a crisis to occur, it is unlikely another brokerage firm would be able to secure capital from the Jewish community - and other sources of support - as efficiently as the Bonds organization. Additionally, Israel Bonds has the advantage of its volunteer lay leadership, which, through extensive networking and valuable introductions, helps facilitate numerous accomplishments. Is the Bonds organization cost-effective? Operational costs of the worldwide Israel Bonds enterprise - just over 2.8 % of bonds sold - compare favorably when measured against similar-sized brokerage firms. Moreover, securities offered by Israel Bonds take advantage of current low interest rates, a major benefit to Israel’s economy. The 2, 3, 5 and 10-year securities currently offered by Israel Bonds average out to a duration of approximately 4.5 years, and an average interest rate of approximately 2.0 %. What message does an Israel bond investment send to BDS (Boycott/Divest/Sanction) advocates? Knowing Israel will never be defeated on the battlefield, BDS supporters employ confrontational economic tactics on a wide variety of fronts. Each and every Israel bond investment has the added value of sending an unmistakable message to BDS advocates: Israel’s economy will remain strong. What does the Bonds organization mean to Israel? For Israel, having the support of Israel Bonds - a reliable and independent financial pipeline - is an invaluable and strategic national resource, especially since Bonds clients have proven time and again that when Israel is in the midst of a crisis, they do not walk away.
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