Israel Bonds

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Prime Minister David Ben-Gurion welcomes an Israel Bonds delegation to Jerusalem.

Israel Bonds is the commonly-known name of Development Corporation for Israel (DCI), the U.S. underwriter of debt securities issued by the State of Israel. DCI is headquartered in New York City, and is a broker-dealer and member of the Financial Industry Regulatory Authority (FINRA). Dani Naveh is president and CEO.

Bonds are sold in Canada through Canada-Israel Securities, Ltd. and in Europe through Development Company for Israel (UK) Ltd. Sales have increased steadily since the initial Independence Issue was offered in 1951, with total worldwide sales exceeding $46 billion.

Initially, investors in Israel bonds were largely Jews who wanted to help Israel. However, private and institutional investors alike viewed Israel bonds as an investment. Over 90 U.S. state and municipal pension and treasury funds have invested more than $3 billion in Israel bonds to date. Other investors in Israel bonds include corporations, insurance companies, associations, unions, banks, financial institutions, universities, foundations and synagogues. Israel uses the net proceeds from the sale of the bonds for general purposes of the state.[1] Bonds cannot be sold or transferred. Sales of Israel bonds have increased during times of crisis for Israel.[2]

History[edit]

1950 to 1951[edit]

The idea to float bonds issued by Israel's government was conceived by Israel's first prime minister, David Ben-Gurion, in the aftermath of the 1948 Arab–Israeli War, when Israel was short on economic resources and did not have access to capital markets.[3]

Ben-Gurion turned to the Diaspora community for help. Ben-Gurion's goals were to obtain millions of dollars in funding for immigrant absorption and the construction of national infrastructure and to engage Diaspora Jewry as active partners in building the new Jewish state. In September 1950, he convened a meeting of American Jewish leaders at Jerusalem's King David Hotel, where he proposed issuing bonds to raise funding. The Knesset voted to launch Israel’s first bond issue in February 1951.[4] The American Jewish leaders supported Ben-Gurion's plan and, in May 1951, the prime minister traveled to New York City to help launch the inaugural Independence Issue at a Madison Square Garden ceremony, raising $35 million.[5] Expectations for first-year sales were $25 million. Instead, final results for 1951 more than doubled projections, exceeding $52 million.[6]

1952 to 1966[edit]

By September 1952, $140 million had been raised. Proceeds were used to help fund projects in Israel's industrial and agricultural sectors, including the Dead Sea Works and National Water Carrier.[7]

By 1957, "bond sales alone amount(ed) to an astonishing 35% of Israel's special development budget." Foreign Minister Golda Meir emphatically stated, "the central role in building our economic strength has been played by Israel bonds."[8]

1967 to 1992[edit]

Over subsequent decades, sales continued to increase, particularly in times of crisis. During 1967's Six-Day War, sales exceeded $250 million, and in 1973, the year of the Yom Kippur War, sales exceeded $500 million.[6] From the mid-1980s to 1992, the bonds were the primary way the Israeli government obtained external funding.[9]

In 1991, the year of the Gulf War and Iraqi missile strikes on Israel, sales exceeded $1 billion.[6]

1993 to Present[edit]

In October 2011, Israel Bonds launched an eCommerce site to facilitate investing in Israel bonds online.[10]

In 2013, U.S. Israel bond sales surpassed $1.12 billion, the first time domestic sales exceeded $1 billion. Sales exceeded $1 billion in each of the 5 following years.[11]

In June 2016, the Bonds organization launched a new initiative to counter anti-Israel activism on campus. Entitled "The Alternative BDS - Bonds Donated to Schools," the program encourages donations of Israel bonds to universities.[12]

In October 2016, Israel Maimon became the organization's president & CEO.[13]

In 2021, Israel bonds are expected to raise $1.3 billion, including $1.1 billion from the United States.[14]

Securities[edit]

Initially, Israel Bonds offered one security. As the program became more successful, multiple investment options were made available. The following bonds are currently offered:[15]

  • Jubilee Bonds – fixed rate 2, 3, 5,10 and 15-year bonds; $25,000 minimum investment and increments of $5,000. Interest is paid semi-annually on May 1 and November 1.
  • Maccabee Bonds – fixed rate 2, 3,5, 10 and 15-year bonds; $5,000 minimum investment and increments of $500. Interest is paid semi-annually on May 1 and November 1.
  • Sabra Bonds – fixed rate 3-year bonds; $1,000 minimum investment and increments of $100. Interest is paid upon maturity.
  • Mazel Tov Bonds – fixed rate 5-year bonds; $100 minimum investment and increments of $10, limited to $2500 per month for each purchaser and holder. Interest paid upon maturity.
  • eMazel Tov Bonds – fixed rate 5-year bonds; $36 minimum investment and increments of $1. Maximum allowable amount purchased by one person during each monthly sales period, registered in the name of one holder, is $2,500; interest paid at maturity. Only available online.
  • Jubilee Fixed Rate Financing Bonds – 2-year bonds; minimum subscription of $100,000 and increments of $25,000; interest paid every May 1st and November 1st.

Although Israel has never defaulted in the payment of principal or interest on any of its internal or external debt, prospective purchasers are warned of sovereign credit risk.[16]

References[edit]

  1. ^ "State Israel Bonds prospectus" – via U.S. Securities and Exchange Commission.
  2. ^ Hemmings, Louis (March 7, 2018). "I'm An Evangelical Christian — And I Invest In Israel Bonds". The Forward.
  3. ^ Barkat, Amiram (June 22, 2021). "Surely it's time to close down Israel Bonds". Globes.
  4. ^ "Facts About Israel Bonds". Jewish Telegraphic Agency. June 8, 2000.
  5. ^ "Ben Gurion Opens Israel Bond Campaign in New York; $35,000,000 Raised at Rally". Jewish Telegraphic Agency. May 11, 1951.
  6. ^ a b c "Israel Business & Economy: State of Israel Bonds". Jewish Virtual Library.
  7. ^ "Israel Appropriated $140,000,000 Subscribed to Bonds in U.S." Jewish Telegraphic Agency. September 12, 1952.
  8. ^ "Organizations: Dollars for Israel". Time. January 21, 1957.
  9. ^ "Annual Report on Form 18-K to the U.S. Securities and Exchange Commission". Israel. July 1, 2002 – via U.S. Securities and Exchange Commission.
  10. ^ OSTER, MARCY (October 5, 2011). "Israel Bonds now available online". Jewish Telegraphic Agency.
  11. ^ "U.S. Sales Exceed $1 Billion for Fifth Consecutive Year". Israel Bonds. December 31, 2017.
  12. ^ TAPOOHI, IZZY (July 6, 2016). "A direct, strategic response to BDS". The Jerusalem Post.
  13. ^ DUBELKO, SKYLAR (September 9, 2020). "Israel Bonds basks in the success of 70 years". Cleveland Jewish News.
  14. ^ Wrobel, Sharon (September 1, 2021). "US States, Diaspora Jews Continue Buying Up Israel Bonds Despite Pandemic Challenges, Says Outgoing President". Algemeiner Journal.
  15. ^ "Israel Bonds: Current Rates". Development Corporation for Israel.
  16. ^ "Risk Factors – Bondsisrael". bondsisrael.com.

External links[edit]