In recent weeks, the economic
conditions in the Israeli economy have worsened significantly, in view of the
spread of the coronavirus and the measures taken to prevent it. Economic activity has been seriously disrupted,
and volatility in the financial markets has increased. In view of this, the Monetary Committee has
decided to launch a government bond purchasing program in the secondary market
totaling NIS 50 billion, with the aim of easing credit conditions in the
economy and supporting economic activity and financial stability.
The Bank of Israel interest rate
has for a long time been at low levels, which makes financial conditions easier
for the business sector and households t.
The bond purchases will enable the Bank of Israel to influence bond yields
in the market along the entire unindexed and indexed curves, and to lower the
costs of longer-term credit for firms and households, as a complementary tool
to the short-term interest rate policy.
The additional monetary support is particularly important at a time when
many businesses and households are encountering liquidity difficulties due to
the serious crisis that is negatively impacting their income.
In addition, the bond purchasing
program will enable the Bank of Israel to moderate serious volatility in bond
yields that is caused by the lack of liquidity in the financial markets, and to
work toward stabilizing the markets.
In parallel to the bond
purchasing program, the Bank of Israel will continue to give
financial entities access to repo transactions with it while using
government bonds as collateral, as the Bank announced
on March 15, 2020, and will also continue the swap tenders program in the
shekel-dollar market, as it announced
on March 18, 2020.