Israel Bonds

State of Israel Bonds conference in Glazen Zaal in RAI, Amsterdam, 1974

Israel Bonds is the commonly known name of Development Corporation for Israel (DCI), the U.S. underwriter of debt securities issued by Israel. DCI is headquartered in New York City, and is a broker-dealer and member of the Financial Industry Regulatory Authority (FINRA). Israel Maimon is the president and CEO.

Bonds are sold in Canada through Canada-Israel Securities, Ltd. and in Europe through Development Company for Israel (UK) Ltd. Sales have increased steadily since the initial Independence Issue was offered in 1951, with total worldwide sales approaching $40 billion.

Initially, investors in Israel bonds were largely Jews who wanted to help Israel. However, private and institutional investors alike viewed Israel bonds as an investment. Over 90 U.S. state and municipal pension and treasury funds have invested more than $3 billion in Israel bonds to date. Other investors in Israel bonds include corporations, insurance companies, associations, unions, banks, financial institutions, universities, foundations and synagogues. Israel uses the net proceeds from the sale of the bonds for general purposes of the state.^[1] Bonds cannot be sold or transferred. Bonds have increased in popularity after crises facing Israel.^[2]

The program been criticized for being unnecessary in the current times and it "greases the palms of Israeli politicians because Israel Bonds finances lecture tours of the US for them and their spouses."^[3] Fundraising, which includes lectures with luxury accommodations at prestigious hotels, first rate food, and a chauffeured car for salespeople, has been criticized to be more expensive than simply raising capital in the international capital markets.^[4]

History[]

1950 to 1951[]

The idea to float bonds issued by Israel's government was conceived by Israel's first prime minister, David Ben-Gurion, in the aftermath of the 1948 Arab–Israeli War, when Israel was short on economic resources and did not have access to capital markets.^[3]

Ben-Gurion turned to the Diaspora community for help. Ben-Gurion's goals were to obtain millions of dollars in funding for immigrant absorption and the construction of national infrastructure and to engage Diaspora Jewry as active partners in building the new Jewish state. In September 1950, he convened a meeting of American Jewish leaders at Jerusalem's King David Hotel, where he proposed issuing bonds to raise funding. The Knesset voted to launch Israel’s first bond issue in February 1951.^[5] The American Jewish leaders supported Ben-Gurion's plan and, in May 1951, the prime minister traveled to New York City to help launch the inaugural Independence Issue at a Madison Square Garden ceremony, raising $35 million.^[6] Expectations for first-year sales were $25 million. Instead, final results for 1951 more than doubled projections, exceeding $52 million.^[7]

1952 to 1966[]

By September 1952, $140 million had been raised. Proceeds were used to help fund projects in Israel's industrial and agricultural sectors, including the Dead Sea Works and National Water Carrier.^[8]

By 1957, "bond sales alone amount(ed) to an astonishing 35% of Israel's special development budget." Foreign Minister Golda Meir emphatically stated, "the central role in building our economic strength has been played by Israel bonds."^[9]

1967 to 1992[]

Over subsequent decades, sales continued to increase, particularly in times of crisis. During 1967's Six-Day War, sales exceeded $250 million, and in 1973, the year of the Yom Kippur War, sales exceeded $500 million.^[7] From the mid-1980s to 1992, the bonds were the primary way the Israeli government obtained external funding.^[10]

In 1991, the year of the Gulf War and Iraqi missile strikes on Israel, sales exceeded $1 billion.^[7]

1993 to Present[]

In October 2011, Israel Bonds launched an eCommerce site to facilitate investing in Israel bonds online.^[11]

In 2013, U.S. Israel bond sales surpassed $1.12 billion, the first time domestic sales exceeded $1 billion. Sales exceeded $1 billion in each of the 5 following years.^[12]

In June 2016, the Bonds organization launched a new initiative to counter anti-Israel activism on campus. Entitled "The Alternative BDS - Bonds Donated to Schools," the program encourages donations of Israel bonds to universities.^[13]

In October 2016, Israel Maimon became the organization's president & CEO.^[14]

In September 2021, Harold Marcus retired.^[15]

In 2021, Israel bonds are expected to raise $1.3 billion, including $1.1 billion from the United States.^[16]

Securities[]

Initially, Israel Bonds offered one security. As the program became more successful, multiple investment options were made available. The following bonds are currently offered:^[17]

• Jubilee Bonds – fixed rate 2, 3, 5 and 10-year bonds; $25,000 minimum investment and increments of $5,000. Interest is paid semi-annually on May 1 and November 1.
• Maccabee Bonds – fixed rate 2, 3 and 5-year bonds; $5,000 minimum investment and increments of $500. Interest is paid semi-annually on May 1 and November 1.
• Sabra Bonds – fixed rate 3-year bonds; $1,000 minimum investment and increments of $100. Interest is paid upon maturity.
• Mazel Tov Bonds – fixed rate 5-year bonds; $100 minimum investment and increments of $10, limited to $2500 per month for each purchaser and holder. Interest paid upon maturity.
• eMazel Tov Bonds – fixed rate 5-year bonds; $36 minimum investment and increments of $18. Maximum allowable amount purchased by one person in a transaction, registered in the name of one holder, is $90. Interest paid upon maturity. Only available online.
• Jubilee Fixed Rate Financing Bonds – 1, 3 5, 10, and 15-year bonds; minimum subscription of $100,000 and increments of $25,000; interest paid every May 1st and November 1st.

Although Israel has never defaulted in the payment of principal or interest on any of its internal or external debt, prospective purchasers are warned of sovereign credit risk.^[18]

References[]

External links[]

• Official website