Debt Developments in the Economy, September–October 2015
Business sector debt increased in September by about NIS 2 billion (0.2 percent), to about NIS 825 billion. Household debt remained virtually unchanged at around NIS 456 billion at the end of the month.
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The business sector’s outstanding debt
· In September, business sector debt increased by about NIS 2 billion to around NIS 825 billion. The increase derived mainly from net raising of debt totaling about NIS 3.2 billion, through bank loans, tradable bonds and non-tradable bonds in Israel, which were partially offset as a result of the net repayment of credit from abroad and nonbank loans, and as a result of the effect of the appreciation of the shekel against the dollar and the decline in the Consumer Price Index by about 0.2 percent, which reduced the shekel value of CPI-indexed debt and debt denominated in and indexed to foreign exchange.
Since the beginning of 2015, outstanding business sector debt increased by about NIS 11.6 billion (1.4 percent). The increase was mainly derived from net raising of debt totaling about NIS 9.4 billion, through bank loans, nonbank loans, and tradable bonds in Israel. These were partially offset by net repayment of non-tradable bonds and credit from abroad.
· In October, the business sector (excluding banks and insurance companies) issued about NIS 3.3 billion in bonds, all in tradable bonds. This is higher than the average issuance of the first nine months of the year (NIS 2.5 billion).
· Households’ outstanding debt remained virtually unchanged in September, at about NIS 456 billion. Of that, the balance of outstanding housing debt increased by about NIS 0.8 billion, to about NIS 318 billion.
Since the beginning of 2015, outstanding household debt increased by about NIS 23 billion (5.3 percent).
· In October, there was a slight increase in new mortgages taken out, with new mortgages totaling about NIS 4.6 billion, lower than the average in the first nine months of the year, which is about NIS 5.5 billion (see Figure 3).
· Thus far in 2015, new mortgages taken out have totaled an average of about NIS 5.4 billion per month, significantly higher than the average of NIS 4.3 billion per month in each of the past two years.
The cost of the debt
· In the CPI-indexed track, the spread between the interest rate on new bank credit granted and the interest rate on deposits narrowed by about 0.36 percentage points in September, compared with the previous month, due to an increase in the interest on marginal indexed deposits and a decline in interest on marginal indexed credit.
· In October, the average spread between the yield on CPI-indexed corporate bonds—measured by the Tel Bond 60—and the yields on CPI-indexed government bonds narrowed to about 1.59 percentage points.
· In October, the average interest rate on new unindexed mortgages (variable-rate interest) remained unchanged. The average interest rate on new CPI-indexed mortgages (fixed interest) increased by about 0.13 percentage points.