Makam

Makam is the Hebrew acronym for Israel’s short-term central bank bill, a security with a maturity of up to one year issued by the Bank of Israel and traded on the Tel Aviv Stock Exchange. It is used as a monetary-policy instrument, a money-market asset, and a reference point for short-term shekel interest-rate expectations.^[1]

Overview

Makam is one of the principal marketable instruments through which the Bank of Israel implements monetary policy in the shekel money market. The Bank of Israel describes Makam as a short-term security, with a term of up to one year, that is issued to the general public and can be traded on the Tel Aviv Stock Exchange.^[1] In English-language Bank of Israel materials it is often described as “central bank bills” or “short-term bills,” while in Israeli market usage the Hebrew acronym Makam is widely used.

The instrument is part of the operational framework surrounding the Bank of Israel interest rate. The policy rate is set by the Monetary Committee of the Bank of Israel, while the Bank’s Markets Department implements policy using instruments that include monetary deposits, monetary loans, the monetary deposit and loan window, Makam issues, repo auctions, bond-market activity and foreign-exchange-market activity.^[6] Makam therefore sits between monetary policy and capital-market infrastructure: it is created for central-bank purposes, but it trades as an exchange-listed short-term security.

A distinguishing feature of Makam is that it is issued to the broader public rather than only to banks. The Bank of Israel states that Makam is issued monthly, so that at any given time there are 12 Makam series traded with a term of up to one year.^[1] This makes Makam a rolling set of short-term securities with different remaining maturities, giving market participants a visible term structure for short shekel rates.

Monetary-policy function

The central monetary-policy function of Makam is liquidity management. The Bank of Israel says Makam enables it to inject or absorb liquidity.^[1] In the Bank’s broader description of monetary-policy management, the issuance and sale of Makam to the public reduces the monetary base, while purchase of Makam by the Bank of Israel or redemption of Makam injects money into the market.^[3]

This role is closely related to the central bank’s need to align short-term money-market rates with the policy rate. The Bank of Israel lists Makam issues among the tools used to achieve the inflation target set by the government.^[6] When the banking system or the wider market has excess liquidity, Makam issuance can absorb shekels by exchanging a marketable bill for cash. When Makam matures, cash is returned to holders unless the liquidity impact is offset through new issuance or other operations.

Makam is not the only absorption instrument in the Israeli monetary framework. The Bank of Israel also accepts time deposits from banking corporations and uses deposit tenders and standing facilities.^[2] Monetary deposit and loan tenders are described by the Bank as the main policy tool for attaining the interest-rate level that has been set, while regular tenders in periods of high banking-system liquidity have been used to absorb liquidity.^[2] Makam complements those bank-focused tools because it is marketable and available to public investors through the securities market.

The public-market character of Makam also gives it an information role. The Bank of Israel states that Makam yields help calculate the public’s inflation expectations and thereby assist in managing monetary policy for terms of up to one year.^[1] In the Bank’s explanation of monetary-policy management, Makam yields, because they are determined in stock-exchange trading, reflect public expectations regarding inflation and changes in monetary policy.^[3]

Issuance and auction structure

Makam is issued through Bank of Israel auctions. The Bank publishes auction announcements and auction results, including the series number, tender date, clearing date, offered quantity, redemption date and number of days to redemption.^[1] The Bank’s published auction tables show both longer series close to one year and shorter series, including series with approximately three months to redemption, reflecting the rolling structure of the market.^[1]

Bank of Israel auction announcements indicate the offered quantity and other tender data, while auction results include figures such as closing yield, average yield, average price, requested quantity, quantity sold, allocation percentage, redemption date and days to redemption.^[1] These data points are important to market participants because they provide primary-market evidence of demand for short-term shekel paper and the yield level at which liquidity is being absorbed.

Although Makam is associated with the central bank, Bank of Israel financial-statement material describes a statutory structure under the Short-Term Loan Law, 5744–1984. The cited financial-statement note states that the law authorizes the government to issue short-term bills to be sold only to the Bank of Israel, with the Bank then selling them to, and buying them from, the public in order to carry out its functions.^[8] The same note states that proceeds from sales of these bills must be deposited with the Bank of Israel and may not be used for purposes other than repayment of the loan or payment of yield under the law.^[8]

For balance-sheet presentation, the financial-statement note explains that the Makam balance shown in the Bank of Israel’s balance sheet reflects the redemption value of bills held by the public, less the unamortized discount.^[8] This accounting treatment is consistent with the economic form of short-term discount securities, whose cash flows are realized through the difference between purchase price and redemption value rather than through a conventional coupon structure.

Trading on the Tel Aviv Stock Exchange

After issuance, Makam can be traded on the Tel Aviv Stock Exchange.^[1] This makes Makam part of Israel’s listed fixed-income and money-market infrastructure rather than merely a central-bank book-entry operation. The trading venue is significant because exchange trading allows investors to buy and sell Makam before maturity, subject to market liquidity and prevailing yields.

The TASE maintains the Tel Gov-Short Term Treasury Bill Index, known as the Makam index. TASE describes this index as including all such short-term certificates listed on the exchange.^[4] TASE identifies the index short name as “T-Bills,” the TASE index code as 800, the ISIN as IL00BIDX8001, the Bloomberg code as TASHTTB and the Reuters RIC as .TBILLS.^[4]

The index is described by TASE as a tracking index disseminated in real time every 15 seconds during trading, with a gross total return calculation method.^[4] TASE states that the index was launched on 31 December 1996, with a base value of 100 and historical data from the same date.^[4] The existence of a dedicated Makam index supports performance measurement for short-term shekel bills and provides a benchmark for products or portfolios that track the Israeli money-market segment.

Because Makam trades on TASE, its yield can change after issuance. A holder buying in the secondary market may earn a return that differs from the auction yield, depending on purchase price, remaining maturity and redemption value. In practice, Makam prices and yields are closely related to expectations for the Bank of Israel interest-rate path, liquidity conditions, demand from mutual funds and institutions, and the supply of outstanding series.

Role for investors and financial institutions

Makam is commonly treated as a short-duration shekel money-market instrument. It is issued by the central-bank framework, matures within one year, and is traded on the local exchange. These features make it relevant for institutional cash management, mutual funds, bank liquidity management, and portfolios seeking listed short-term shekel exposure. This description is not a recommendation to buy or sell Makam; it describes the instrument’s market role.

The Bank of Israel’s Statistical Bulletin for 2024 stated that the balance of Makam held by the public increased to NIS 212 billion by the end of 2024, an increase of NIS 10 billion, even though Makam issues contracted.^[7] The same bulletin reported that mutual funds increased their Makam holdings by NIS 18 billion during 2024, while institutional investors’ Makam holdings grew by NIS 5 billion and households reduced their holdings by NIS 3 billion to NIS 8 billion.^[7]

Those data illustrate the institutional importance of Makam in Israel’s short-term debt market. Mutual funds and institutional investors can use Makam as a liquid short-duration asset, while households may access it directly through securities accounts or indirectly through savings and investment products that hold short-term instruments. The balance of holders can shift across cycles as policy rates, deposit rates, fund flows and perceived alternatives change.

Makam also functions as eligible collateral in parts of the Bank of Israel’s monetary framework. The Bank of Israel states that collateral used in monetary loans, intraday credit and long-term loans includes Makam, government bonds, deposits at the Bank of Israel and certain other securities.^[9] In the Bank’s description of monetary loans, banking corporations provide collateral, including government bonds and Makam, when borrowing from the Bank.^[2]

Relationship to deposits and other monetary instruments

Makam should be distinguished from monetary deposits, monetary loans and the standing deposit or loan window. Monetary deposits and loans are transactions between the Bank of Israel and banking corporations, used to influence the money supply and short-term interest rates.^[2] Makam, by contrast, is issued to the public and traded on the exchange.^[1]

The Bank of Israel’s monetary deposit and loan window provides banking corporations with one-day loans or deposits at rates set as spreads around the Bank of Israel interest rate. The Bank describes the window rates as forming a “band” around the policy rate; deposits or loans through the window are repaid the following business day, and loans are subject to collateral.^[5] Makam has a longer maturity profile, up to one year, and its market price can move during its life.

Repo operations are also distinct. The Bank of Israel describes repo as a repurchase transaction in which the Bank sells government bonds and Makam to banks and financial institutions and buys them back after one week at a pre-set price.^[10] In such a transaction, Makam can be an asset used in the operation, whereas Makam issuance itself is the creation and sale of a short-term bill to absorb liquidity.

The mix between Makam and other absorption tools changes over time. In the Bank of Israel’s 2024 financial statements, the Bank stated that Makam and time deposits served as monetary tools for absorbing excess market liquidity. The combined balance of those instruments decreased by about NIS 4.7 billion in 2024 to NIS 585 billion; within that total, Makam decreased by NIS 82.7 billion while time deposits increased by NIS 78 billion, reflecting a relative decline in demand for Makam compared with 2023.^[11]

Yield, pricing and expectations

Makam is economically similar to a short-term discount bill. The investor’s return is generally reflected in the difference between the purchase price and redemption value, adjusted for time to maturity and any secondary-market sale price. Auction-result tables published by the Bank of Israel report prices and yields, allowing observers to compare Makam yields across maturities.^[1]

The yield of Makam is important because it is a market-based short-term shekel rate. Unlike an administered policy rate, it reflects investor bids, secondary-market trading, and expectations for future policy and inflation. The Bank of Israel explicitly states that Makam yields help calculate public inflation expectations and help manage monetary policy up to one year.^[1] In this sense, Makam provides both an instrument of policy and a signal about market perceptions of policy.

Makam yields are not identical to bank deposit rates. Bank deposits involve bank credit exposure, deposit terms, and pricing decisions by banks, while Makam is a tradable security issued under the central-bank framework. Conversely, Makam is exposed to mark-to-market fluctuations if sold before maturity. For an investor holding to redemption, the realized nominal shekel return is determined mainly by the purchase price, redemption value and time held, subject to fees and taxation rules that may apply to the holder.

Balance-sheet and fiscal distinctions

Although Makam is a short-term bill connected to the state’s legal framework, it is primarily a monetary instrument rather than a fiscal-financing tool. The financial-statement note under the Short-Term Loan Law states that proceeds are deposited at the Bank of Israel and may not be used by the government except for repayment of the loan or payment of yield.^[8] This distinguishes Makam from government debt issued to finance the budget.

In the Bank of Israel’s own financial accounts, Makam can generate interest or discount expenses as part of domestic monetary operations. The Bank’s 2024 financial-statement release stated that expenses from activity in Israel, mostly interest expenses in respect of monetary absorption instruments—Makam and time deposits—totaled about NIS 26.4 billion in 2024, reflecting the high shekel interest-rate environment.^[12] The full 2024 financial statements similarly reported that the main local expenses arose from interest on monetary absorption tools, totaling NIS 25.9 billion in 2024.^[11]

These figures show that Makam affects the central bank’s income statement when policy rates and absorption needs are material. Higher short-term interest rates can raise the cost of absorbing liquidity through Makam and deposits. However, those costs are part of monetary-policy implementation and should be interpreted in the context of the Bank’s public mandate rather than as the profit-and-loss logic of a commercial issuer.

Market significance

Makam is a core Israeli money-market instrument because it connects the Bank of Israel’s operating framework, TASE’s securities market, and investor demand for short-term shekel assets. It provides a regular set of maturities, a secondary market, and observable yields that assist both policymakers and market participants.

The instrument also provides a bridge between retail and institutional markets. The Bank of Israel’s public information page states that a Makam is a short-term security issued to the general public by the Bank of Israel and traded on TASE, and that it is a tool used by the Bank to manage monetary policy.^[13] That combination—public investment instrument and central-bank policy tool—makes Makam unusual compared with purely interbank monetary instruments.

For Israel’s financial system, Makam’s importance is not limited to its outstanding size. It is also embedded in collateral frameworks, money-market benchmarks, mutual-fund portfolios, exchange indices, and the interpretation of expected short-term interest rates. Its yields can therefore be relevant to broader questions about inflation expectations, monetary transmission, short-term savings alternatives and the liquidity position of the shekel financial system.