Treasury hedges $200m in 3 deals

In the past few months, the Ministry of Finance has bought $1 billion to hedge dollar-denominated debt.

The Ministry of Finance has changed its policy and officially joined the Bank of Israel's effort to weaken the shekel to support exports. Sources inform ''Globes'' that, on Wednesday the Government Debt Unit under Accountant General Michal Abadi-Boiangiu, hedged $200 million in three deals.

In the past few months, the Ministry of Finance has bought $1 billion to hedge dollar-denominated debt. Until now, the ministry has said that its intervention in the market was solely intended to exploit the low exchange rate to reduce payments on dollar-denominated debt, but the size and frequency of the hedges imply a change in policy.

"We have a macroeconomic responsibility, which is why we're committed to helping support exports and therefore jobs," said a Ministry of Finance sources today, implying that the ministry will continue to intervene in the market for as long as possible. The sources added that Minister of Finance Yair Lapid ordered the change in direction.

Despite the Ministry of Finance's efforts, the Bank of Israel still leads activity in the foreign currency market: while the Ministry of Finance has bought almost $1 billion on the open market, the Bank of Israel has bought $5 billion, including $1.5 billion in October alone.

It should be noted that talks resumed this week on the Bank of Israel's request to cancel the tax exemption on profits by foreign investors from the sale of government bonds. "Globes" first reported on the talks a few months ago. "Several months ago, we asked Bank of Israel officials to consider the matter. There was a discussion, and the entire Ministry of Finance management, without exception, voted against cancelling the exemption," said a top Ministry of Finance official.

The sources said that Lapid is still deliberating whether to accept the Bank of Israel's request, and has even scheduled a meeting on the matter for next week.

Published by Globes [online], Israel business news - www.globes-online.com - on November 14, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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