Israel tests investor appetite with first Eurobond sale since Gaza ceasefire

Israel has reportedly returned to international debt markets with a new multi-tranche Eurobond sale, marking its first global fundraising effort since the Gaza ceasefire nearly three months ago.

The issuance comes after an extended period in which the government relied heavily on domestic borrowing to fund elevated defence and security spending during the war.

The deal, as reported by Bloomberg, aims to raise several billion dollars and follows a series of investor meetings across the US, Europe, and Asia.

Officials involved in the process said feedback from global investors has been positive, prompting Israel to expand the structure of the sale beyond its usual maturities.

The move highlights a shift back toward overseas funding after months of record issuance at home.

Global markets back in focus

The Eurobond sale includes maturities of five, 10, and 30 years, as per Bloomberg.

Ahead of the offering, Israeli officials met dozens of institutional investors across major financial hubs to gauge demand and refine pricing.

The five-year notes are being marketed at a spread of around 120 basis points over US Treasuries.

The 10-year tranche is indicated at roughly 130 basis points, while the 30-year bonds are being shown at about 150 basis points over the benchmark.

Israel last tapped global debt markets in February last year, when it raised $5 billion through five- and 10-year bonds.

The inclusion of a 30-year tranche in the current sale follows investor demand for longer maturities, adding duration to Israel’s external debt profile.

War-driven borrowing surge

Israel’s return to global markets follows a period of exceptional borrowing triggered by its two-year war against Hamas, which also spread to other fronts involving Iran and Lebanon.

The conflict significantly inflated defence spending and reshaped government financing needs.

Bloomberg states that Prime Minister Benjamin Netanyahu’s government embarked on a record borrowing programme that totalled nearly 280 billion shekels, or about $89 billion, in 2024.

Most of that issuance was absorbed by domestic markets, limiting Israel’s engagement with international investors during the height of the war.

Borrowing levels last year are expected to have exceeded 200 billion shekels, placing them among the highest annual totals in decades, excluding the Covid-19 pandemic period.

Credit risk signals stabilise

Market measures tracking Israel’s sovereign risk have shown signs of easing in recent months.

Five-year credit default swap prices, commonly used by investors to hedge against default risk, have fallen to around 69 points.

That represents a sharp decline from the peak of 144 points reached in August 2024, when concerns over the conflict and fiscal strain were at their highest.

The move lower suggests reduced near-term stress perceptions among investors as the ceasefire has held.

Despite the stabilisation in market indicators, Israel’s sovereign credit standing remains under scrutiny.

During the war, all three major rating agencies downgraded Israel’s rating by two notches, citing heightened geopolitical and fiscal risks.

S&P revised Israel’s rating outlook to stable from negative in November.

Moody’s and Fitch have maintained negative outlooks, reflecting ongoing concerns around debt levels and regional security conditions.

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