Debt Developments in the Nonfinancial Private Sector, First Quarter of 2017

Despite the quantitative increase in business sector debt, a decline in the value of debt denominated in and indexed to foreign exchange and other factors led to the fact that outstanding business sector debt[1] declined in the first quarter of 2017 by about 0.5 percent, to about NIS 842 billion. Household debt increased in the first quarter by about 1.3 percent, to around NIS 511 billion.

 

The business sector’s outstanding debt

·         In the first quarter of 2017, there was a quantitative increase in business sector debt in tradable bonds in Israel, bank loans and nonbank loans.  This quantitative increase was offset mainly as a result of the effect of the 5.5 percent appreciation of the shekel vis-à-vis the dollar, which lowered the value of the debt denominated in and indexed to foreign exchange.  A quantitative decline in loans from nonresidents was also a factor in offsetting the increase. As a result of these effects, business sector debt declined by about NIS 4.5 billion (0.5 percent) to around NIS 842 billion at the end of the quarter.

·         The increase in the growth rate of debt to nonbank entities continued, mainly due to an increase in outstanding tradable bonds in Israel.  At the same time, the decline in the growth rate of debt to banks continued.

·         In the first quarter, the business sector (excluding banks and insurance companies) issued about NIS 17 billion in bonds, significantly higher than the total issuances in the previous quarter (NIS 8.5 billion).  Companies in the real estate and construction industry were prominent issuers in the first quarter (about 46 percent of total issuances). In April 2017, the business sector issued a total of about NIS 3.4 billion in bonds, mostly in tradable bonds.

·         The spread between yields on CPI-indexed corporate bonds, as measured by the Tel Bond 60 index, and the yield on CPI-indexed government bonds narrowed by about 0.35 percentage points between November 2016 and March 2017. In April 2017 there was a slight widening of the spread by about 0.04 percentage points, to about 1.12 percentage points.



Household debt

·         Households’ outstanding debt increased by about NIS 7 billion (about 1.3 percent) in the first quarter to about NIS 511 billion.

·         Outstanding housing debt increased in the first quarter by about NIS 4 billion (1.2 percent), to about NIS 343 billion.

·         In the first quarter of the year, new mortgages taken out totaled about NIS 13 billion, lower than the same period last year (about NIS 15 billion).  In April, the decline in new mortgages taken out continued, with a total of about NIS 3.7 billion taken out.  Net of seasonal effects, new mortgages taken out in April totaled about NIS 4.3 billion (Figure 4). 



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[1] In the first quarter of 2017, a retroactive methodological correction was made to the “Credit from Abroad” item.  Click here for more details.

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