Monday, July 23, 2018

Israel: Zero Financial Risk

Some Asian country lent Israel a quarter billion Euro near zero (0.05%)  interest. I understand the rational of zero or negative interest rate loans to enterprises or to consumers - to stimulate the economy, but this is not the case. Apparently the world has no investment opportunities better than giving the money to Israel to keep it for them. Maybe they have so much reserves that need to diversify.  Probably they are speculating that Israel will have to pay back he debt with overvalued dollars, that is, the dollar will be more valuable in the future, maybe because the Fed will increase the interest rate. Israel could easily buy some lower rated bond, like Turkish bonds paying 15%, bear the risk and make a handful of dollars. Apparently my vision of Israel as a financial center a-la-City of London is on the way to reality. Maybe in fifty years.

Ill,: Frankfort Judengasse. 


  1. * Quarter of a billion Euros.

    Even Temasek doesn't have €250B.

  2. Temasek has 225 billion US dollars. It can lend 0.25 billion Euros at 0.5% just to open an account with the Bank of Israel. May be some one needs an alibi to come and enjoy Tel Aviv's Gay Parade.

  3. BTW, we have no need for loans. The operation must have some other rational. In my time, Buenos Aires Jews believed that money should not let to rest for long but must be taken out to exercise.

  4. Mysteries of the bond world.

    Absurdly, the interest comes to €125,000 per year. But if you want Germany to hold on to your €250M for three years, they will charge you €1.23M per year for the privilege.

    Meanwhile, the US Treasury is paying 2.75% on 3-year (dollar) notes.

  5. TMUBMUSD03Y reflects, apparently, an expectation of Trump's financing needs for his projects. Some commenters say it announces some kind of recession. I don't see that. Regarding the Euro loan above, I imagine that none of the parties has real use for the operation, and it is done to just cultivate good operational relations. To improve credit rating or something like that. Permanent friendly intercourse - the only strategy that solves the prisioners' dilemma.