Lior David-Pur Head of Debt Management Unit Ministry of Finance, - - PowerPoint PPT Presentation

Webinar The World Bank March 2018

Why are more sovereigns issuing in Euros? Choosing between USD and EUR-denominated bonds Lior David-Pur Head of Debt Management Unit Ministry of Finance, Israel

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Funding (issuance) Policy

Local Market External Market

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Foreign Currency Debt

Source: MOF, Q3-2017, Other roughly 2%

9% 9% 7% 14% 14% 14% 15% 19% 15% 14% 24% 88% 89% 91% 84% 84% 84% 83% 79% 83% 84% 74% 0% 50% 100% Other EUR Debt USD Debt 75% 77% 80% 81% 81% 82% 84% 86% 85% 86% 87% 87% 25% 23% 20% 19% 19% 18% 16% 14% 15% 14% 13% 13% 0% 50% 100% Local Currency Debt Foreign Currency Debt

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250 200 168 250 413 500 350 750 500 9091,000 1,500 2,070 1,500 2,000 2,050 1,700 2,380 2,000 EUR USD

Global Issuances (USD Millions)

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Risk Management Policy

74% 24% 0% 2% 68% 20% 10% 2% 0% 50% 100% USD EUR NIS Other Without Hedging With Hedging

Source: MOF, First chart - Q3-2017 , Second chart December 2016

MTM Notional

• 500

1,000 1,500 NIS EURO NIS CPI 29 16

• 8

1,864 100 50 USD Millions FX Swap Forward CCS

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Debt Management Framework

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Case Study

Example for Issuances (Indication) Example for Hedge (Indication)

Data: Bloomberg February 2018 *Simplistic assumption - same spread. In practice depends on current market and economic conditions

Column A Column B Column C Column D USD (%) 2018 Current EUR (%) 2017 Current Maturity 10Y Maturity 10Y Treasury 2.50 2.90 Mid-Swap 0.63 1.08 Spread 0.75 0.75* Spread 0.87 0.87* USD Coupon 3.25 3.60 EUR Coupon 1.50 1.95 USD Issuance Coupon 3.60 EUR Issuance Coupon 1.95 EUR Swap (+) 1.08 USD Swap (+) 2.90 USD Swap (-) 2.90 EUR Swap (-) 1.08 EUR Basis (+)

• 0.30

EUR Basis (-)

• 0.30

CCS EUR Coupon 1.50 CCS USD Coupon 4.07

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Case Study 2

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To conclude