Bond purchases taper, while FX intervention accelerates

ISRAEL - In Brief 06 May 2021 by Jonathan Katz
Government bond purchase tapering is gradually taking place. In April, the BoI purchased 3.4bn ILS following 4.1bn in March and 4.4bn in February. The Governor hinted at this trend recently, justified in his view, by the rapid recovery of the economy. 62.3bn have been purchased out of the present 85bn ILS framework. This gradual tapering is being offset by lower bond issuance by the Ministry of Finance.On the other hand, FX purchases accelerated to 5.3bn in April, following 1.9bn in March. Apparently, the sensitivity to “too sharp” an appreciation remains. We note that despite this large amount of intervention, the shekel appreciated by 1% in April against the basket. Two thirds of the present 30bn USD FX intervention scheme has been utilized, but further purchases are expected when this is used up.The BoI will most likely continue to taper bond purchases, but will remain rather active in the FX market, in order to slow (but not prevent) shekel appreciation.

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