Bank of Israel Expands Crisis QE With $13.6 Billion Bond Buying
Bank of Israel Expands Crisis QE With $13.6 Billion Bond Buying
(Bloomberg) -- Israel’s central bank is adding to its lead role in trying to keep the economy and markets from unraveling in the face of the coronavirus outbreak.
Policy makers on Monday committed to purchase 50 billion shekels ($13.6 billion) of government bonds in the secondary market to ease credit conditions and support activity. The Bank of Israel specified the scale of quantitative easing after re-starting the program last week for the first time since 2009, with an aim of stabilizing the market and lowering yields across the curve.
The shekel extended losses against the dollar after the announcement, while prices on 10-year government bonds rose.
As the coronavirus outbreak hammers local and global markets, Israel has entered a partial economic shutdown, with infections rising past 1,200 cases with one fatality. The government has announced an aid package worth 29 billion shekels, much of it in low-cost state-backed loans and tax payment deferrals.
With its key interest rate already near zero, the Bank of Israel is focusing on boosting liquidity in markets. Along with purchasing government debt, it’s also using its large store of foreign-currency reserves to offer up to $15 billion worth of swaps to ease pressure for dollar liquidity among local lenders.
The central bought just 18 billion shekels of government bonds during its financial crisis-era program a decade ago.
Israel’s currency depreciated significantly since the crisis amid the crunch for dollars globally. JPMorgan Chase & Co. analysts said in a Friday note said that the sell-off was due to “domestic financial leverage and hedging behavior of domestic investors.”
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