Israeli corporate bond market

The Israeli corporate bond market is the market in which companies raise debt by issuing bonds, with many publicly traded issues listed on the Tel Aviv Stock Exchange (TASE). Investors lend to issuers under specified payment and maturity terms, and may trade listed bonds before maturity. The market provides a non-bank financing channel and is monitored by the Bank of Israel and regulated securities authorities.^[1][2]

Structure and participants

The market’s central venue is TASE. The exchange describes corporate bonds as securities that a corporation may list either as a standalone public investment or alongside its shares. TASE bond trading takes place through an exchange trading system, rather than solely through the over-the-counter model common in many international bond markets.^[1] Listing does not mean that every bond trades frequently: trading activity differs among issues, and the exchange has identified secondary-market tradability as an area for development.^[3]

Issuers include companies from financial and non-financial sectors. Banks and other financial companies are represented alongside businesses such as property, construction, trade and services firms. The Bank of Israel groups tradable bonds by characteristics including issuer industry and credit-rating category. These groupings allow it to compare yields, margins and other measures across segments rather than treating all corporate debt as a single uniform asset class.^[2]

Investors include households and financial institutions. Institutional investors in Israel manage long-term savings through vehicles that include pension funds, provident funds, advanced training funds and insurance companies.^[4] Such institutions and investment funds can hold corporate bonds directly or through portfolios and collective investment products. The mix of investors matters for market demand and the capacity of issuers to place debt; it also means that developments in bond prices and redemptions from investment funds can affect market conditions.

Development of the market

The growth of corporate bond issuance formed part of a broader change in how Israeli businesses obtain credit. In 2005, the Bank of Israel reported that credit to the business sector from institutional investors had grown rapidly and that almost all of the increase that year came from investment in negotiable and non-negotiable corporate bonds. The Bank connected this change to reforms in the financial system, including the Bachar reforms, and noted that expanded non-bank lending spread credit exposure beyond banks while creating new credit-risk oversight challenges for institutional investors.^[5]

The Bank of Israel’s review of tradable corporate bonds reported market value of NIS 376 billion at the end of 2019. That figure is a historical measure, not a current market-size estimate. For a separate reference point, TASE’s corporate fact sheet counted 708 corporate bond series at the end of 2024. The same fact sheet reported average daily turnover in corporate bonds, including exchange-traded funds, of US$291.3 million during 2024.^[2][6] Market-value figures, issue counts and turnover measure different aspects of the market and should not be treated as interchangeable.

The market includes repeat issuers and multiple series from a single company. A company may issue bonds with different maturities, payment schedules, security arrangements or other contractual terms. As a result, a bond series is not equivalent to an issuer: an investor assessing a particular issue must consider the terms of that instrument as well as the company’s overall financial position.

Issuance and trading

A corporate bond is a debt obligation: the issuer promises payments according to the instrument’s terms, which commonly set out interest payments, principal repayment and maturity. The detailed terms are specific to the issue. Some bonds may have collateral or financial covenants; others may be unsecured. The legal documents govern the rights of holders and the circumstances in which repayment terms or other obligations can be enforced.

Under Israel’s Securities Law, securities include certificates issued in series by a company or other corporate body that confer a claim on that entity. The law also defines commercial securities as certain corporate payment undertakings with terms of between seven days and one year.^[7] The legal category and offering process depend on the instrument and the circumstances of the issue. Public offerings and ongoing reporting requirements are part of Israel’s securities-regulatory framework, overseen by the Israel Securities Authority (ISA), which is responsible for investor protection and monitoring reports by relevant corporations.^[8]

Once listed, bonds can be traded on TASE. Their market prices respond to factors that include changes in benchmark interest rates, investors’ assessment of the issuer’s ability to pay, the bond’s remaining maturity and trading conditions. The Bank of Israel publishes yield-to-maturity and yield-margin data based on TASE trading data, including corporate-bond margins by exchange grouping and rating category.^[9] A yield margin, or spread, is the difference between a bond’s yield and a selected comparison yield; it can help describe how the market prices credit and other risks relative to that benchmark. It is not by itself a complete measure of the likelihood of default.

Bond characteristics and indices

Israeli corporate bonds can differ in currency, maturity, coupon structure and linkage to inflation. Some shekel-denominated bonds are linked to the Israeli Consumer Price Index, while others are not. Index-linked terms affect how payments or principal are calculated under the bond documentation; they do not remove issuer credit risk. Issuers may also provide for fixed or variable interest payments, subject to the terms of the relevant series.^[1][2]

TASE calculates the Tel Bond family of indices to represent selected groups of corporate bonds. The Tel Bond-20 CPI Linked Index, introduced in February 2007, comprises 20 eligible corporate bonds with fixed coupons and CPI linkage, selected from the Tel-Bond universe according to index criteria that include market capitalisation.^[10] Other index baskets group bonds using different eligibility rules. An index can serve as a benchmark for a defined segment and as the basis for investment products, but it is not the same thing as the full bond market.

The Bank of Israel also calculates bond aggregates for analysis. These aggregates combine bonds with shared attributes and can be used to study yields, margins, duration and changes in risk across industry or rating groups.^[2] Because calculations depend on the bonds included and the weighting approach, an aggregate is an analytical summary rather than a rating or guarantee for every bond in the group.

Regulation, disclosure and oversight

The ISA’s mandate includes safeguarding the interests of the public investing in securities and monitoring reports by relevant corporations.^[8] TASE operates the listing and trading venue and maintains market information and index methodologies. The Bank of Israel collects and analyzes information on securities traded on TASE, including corporate bonds. Its stated purposes include examining the transmission of monetary policy and monitoring risks to financial stability.^[2]

Bondholders’ rights are determined by the issue documentation and applicable law. In public bond issues, a trustee may act in relation to the bondholders under the relevant trust arrangements. The ISA’s general oversight of reporting and securities markets is distinct from the credit assessment performed by investors, rating agencies or other market participants. Ratings express an assessment under a particular agency’s methodology; they are not a promise that an issuer will meet its obligations.

Risk and market monitoring

Corporate bonds carry credit risk: an issuer may fail to make interest or principal payments as required. They also have interest-rate and market-price risk, because the value of an existing bond may change when benchmark yields, inflation expectations or perceptions of the issuer change. Liquidity risk is another consideration: an investor may not be able to sell an issue promptly at a price close to its estimated value, particularly when trading in that series is limited.

Research by Bank of Israel economists examined tradable corporate-bond data from 2007–2020 and found that, in some periods, spreads for a material portion of market value were below levels predicted by the fundamental factors used in the analysis. The researchers also found that rapid aggregate inflows into corporate-bond mutual funds contributed to strengthening deviations between observed and predicted spreads, especially after the 2008 financial crisis.^[11] These findings describe historical relationships in the dataset; they are not a claim that spreads are currently mispriced or a prediction of future market movements.

Market conditions can also change with economic and geopolitical events. In its review of 2024, the Bank of Israel reported that corporate-bond spreads in the business sector declined to levels below those recorded before the war, in line with a global trend. This observation is specific to the period and context described in that annual report.^[12] The Bank publishes market data and analysis that support ongoing monitoring of bond yields, credit margins and financial stability.^[2][9]

TASE has also taken steps to address liquidity within its corporate-bond indices. In June 2026, it announced changes to the indices’ eligibility approach, including using median daily turnover over a 180-trading-day period as a primary liquidity test and setting separate entry and exit criteria. The exchange said the changes were intended to improve tradability and reduce unnecessary index turnover.^[3] Index eligibility criteria affect which bonds qualify for those indices; they do not ensure liquidity in every listed issue.

Role in the financial system

The corporate bond market gives eligible companies an alternative to relying exclusively on bank loans and gives investors a route to provide credit to businesses through traded securities. It also contributes to price information: observed yields and spreads reflect market assessments that can be compared across sectors, ratings and maturities. The Bank of Israel uses such information in its analysis of monetary-policy transmission and financial-system risks.^[2]

The market’s development has increased the range of financing channels available to businesses, while shifting part of credit assessment and monitoring toward institutional investors and other bondholders. That structure links corporate financing conditions to the investment decisions of long-term savings managers and the public’s holdings of funds. It also makes ongoing disclosure, analysis of issuer creditworthiness and attention to trading liquidity significant features of the market’s operation.^[5][11]