Israeli money market

The Israeli money market is the part of Israel’s financial system in which institutions manage short-term funding and liquidity and trade or issue short-maturity instruments. Its core includes bank deposits and borrowing, the Bank of Israel’s monetary operations, and MAKAM bills, while repo transactions provide a securities-backed form of short-term financing. The market transmits monetary policy and supplies instruments for cash management.^[1][2]

Scope and participants

The term “money market” refers to short-term financing and instruments rather than to a single exchange or a discrete class of investors. In Israel, banks are central participants because they hold settlement balances, borrow and deposit funds, and take part in the Bank of Israel’s monetary auctions. The central bank also conducts operations involving nonbank financial institutions and securities. Its repo auctions, for example, have been open to banking corporations and supervised entities including provident funds, insurance companies, pension funds and mutual funds.^[1][3]

The government and its debt-management functions are also connected to short-term liquidity and securities markets, although government bonds across all maturities are not themselves money-market instruments. MAKAM is distinct: it is issued by the Bank of Israel, not the government, and has a maturity of up to one year. It is offered to the public and traded on the Tel Aviv Stock Exchange.^[2] Market participants may use short-term instruments to place temporary cash balances, obtain funding, manage liquidity or express views about future short-term interest rates. Specific access, trading and settlement arrangements depend on the instrument and participant.^[1][2]

Monetary-policy framework

The Bank of Israel sets short-term interest rates as part of its monetary policy, whose principal objective is price stability in line with the government’s inflation target. The Bank says it periodically determines the policy rate and implements policy through the Markets Department, using monetary auctions, MAKAM auctions and repo auctions, and, when necessary, transactions in foreign exchange, MAKAM and bonds.^[4]

Bank of Israel deposit and loan auctions are among its main tools for influencing short-term money-market rates. The Bank invites banks to borrow from it or place deposits for short periods, including overnight or one-week terms. It also provides standing credit and deposit windows to banking corporations. The rates on those windows are set above or below the Bank’s headline policy rate, respectively, and the credit window requires collateral.^[1] These arrangements give banks ways to manage short-term liquidity and help link market rates to the central bank’s policy stance.

The Bank describes its broader set of monetary instruments as including loans to banking corporations, deposits by banking corporations, credit and deposit windows, MAKAM issuance, open-market transactions and repo auctions.^[5] These tools operate through different channels. A deposit or loan auction directly exchanges central-bank balances for funds over a specified term; a MAKAM issue creates a tradable short-term security; and a repo operation exchanges cash and securities under an agreement to reverse the transaction later.^[1][2][3]

MAKAM bills

MAKAM—also rendered “Makam”—is the Hebrew acronym used for the Bank of Israel’s short-term bills. They are securities with terms of up to one year, issued to the general public and traded on the Tel Aviv Stock Exchange. The Bank describes MAKAM as a means of injecting or absorbing liquidity, and says its yields can help calculate public inflation expectations and inform monetary policy for horizons of up to one year.^[2]

MAKAM is issued through auctions. The Bank’s auction results include items such as the series, closing and average yields, average price, quantity requested and sold, allocation percentage, and redemption date.^[2] In the secondary market, prices and yields can change as market participants revise their expectations about interest rates and other conditions. Because of their short maturity and central-bank issuer, MAKAM bills are a prominent reference point for short-term shekel investment and funding, but their market yield is not identical to the Bank’s policy rate: it reflects trading and the security’s remaining term as well as expectations.^[1][2]

The Bank publishes market-based yield information for MAKAM and government and corporate bonds using trading data from the Tel Aviv Stock Exchange. Its statistical pages include yield-to-maturity curves and related measures, providing a source for tracking short-term and longer-term market pricing.^[6] MAKAM therefore serves both as a tradable instrument and as a source of information about market expectations. Such yields are indicators derived from prices, not direct statements of the Bank’s future policy decisions.^[2][6]

Repo transactions and collateral

A repurchase agreement, or repo, is a transaction in which securities are sold with an agreement to buy them back at a later date and a specified price. Economically, it can provide short-term financing against securities, with the repurchase-price difference reflecting the financing cost. In its monetary operations, the Bank of Israel uses repo and reverse-repo structures. In a reverse repo, the Bank buys tradable government bonds or MAKAM and later sells them back at a price that includes interest.^[1][3]

The Bank has used repo operations in specific circumstances. It operated a market-liquidity program during 2007–2009 and discontinued that use in October 2009, citing a high liquidity surplus. During the COVID-19 crisis it introduced repo transactions with institutional investors, accepting government bonds, MAKAM and, under specified criteria, corporate bonds. In January 2021 it also offered transactions to supervised nonbank credit providers subject to conditions linked to lending to small and micro businesses.^[3] These episodes illustrate how central-bank repo operations can serve as temporary liquidity tools; they do not by themselves establish the scale or activity of private-market repo trading.

Collateral is central to secured lending. The Bank of Israel lists MAKAM, government bonds, certain deposits and eligible foreign securities among collateral that can be used for specified Bank facilities. It also lists mortgage portfolios for long-term loans subject to eligibility conditions.^[7] Eligibility for a central-bank facility is not equivalent to universal eligibility in private transactions; counterparties and transaction terms may differ.

Market development and infrastructure

The private repo market has been identified by Israeli authorities and market institutions as an area for development. In February 2025, the Accountant General’s Department at the Ministry of Finance, the Bank of Israel, the Israel Securities Authority and the Tel Aviv Stock Exchange jointly invited proposals on ways to advance the market. Their announcement characterized Israel’s repo market as limited and underdeveloped and sought input on barriers, possible mechanisms, collateral and operational models.^[8]

The initiative described repo as a way to exchange cash for securities collateral and identified potential functions including liquidity management and fundraising in shekels and foreign currencies, as well as improving the liquidity and marketability of securities used as collateral.^[8] These are stated potential benefits, rather than evidence that a broad, deep private repo market had already been established. The announcement’s focus on identifying obstacles and soliciting proposals indicates that market structure and operational arrangements remained subjects of policy and industry discussion at that time.^[8]

Rates, benchmarks and data

Money-market rates are influenced by the Bank of Israel’s policy rate and liquidity operations, but also reflect the terms, counterparties and instruments involved. The central bank’s website presents financial-market information, monetary tools, MAKAM auction results and market-based yields. The Bank also provides yield data based on Tel Aviv Stock Exchange trading for MAKAM and bonds.^[1][2][6] Analysts and market participants can use these series to compare short-term yields and observe changes in market pricing, while distinguishing observed yields from official policy decisions.

Benchmark terminology has changed over time. The Bank’s financial-markets page identifies the Telbor market and the shekel overnight interest rate (SHIR) among its market topics, and notes the cessation of Telbor publication in a 2025 press notice.^[1] Consequently, historical rate data and current benchmark references should not be treated as interchangeable without checking their definitions and publication periods.^[1]

Relationship to other Israeli markets

The money market is connected to, but distinct from, Israel’s government and corporate bond markets. MAKAM is short-term and issued by the central bank; government and corporate bonds may have a wider range of maturities and credit characteristics. The Bank publishes yield information covering these instruments, which allows comparisons across the curve but does not make all bonds money-market securities.^[2][6]

It is also distinct from the foreign-exchange market, even though the Bank of Israel may use foreign-exchange operations alongside domestic monetary tools. Short-term shekel funding conditions can be relevant to banks and investors active in other markets, but money-market activity concerns short-term cash, deposits, central-bank operations and eligible securities-based funding.^[1][4]

Significance and limitations

The Israeli money market provides a channel through which monetary-policy decisions and liquidity conditions influence short-term financing costs. MAKAM adds a tradable central-bank security, while deposit and loan auctions and central-bank facilities support bank liquidity management. Repo transactions can mobilize securities as collateral for financing, though official sources describe the private repo market as an area requiring further development.^[1][2][3][8]

Market indicators should be interpreted according to their instrument and context. A MAKAM yield is a market price-derived rate for a particular maturity; a Bank of Israel policy rate is a monetary-policy decision; and a repo rate applies to a transaction with specific collateral, term and counterparties. They are related but are not identical measures.^[1][2][3] The Bank’s published statistics and auction results provide sources for examining activity, but changes in individual yields alone do not fully describe market liquidity, trading depth or access across participant types.^[2][6]