The Telbor Market

In order to support the development of the short term interest rates market (the Telbor market), the Bank of Israel established in early 2007 an inter-organization committee, "The Telbor Interest Rate Committee". The main goal of the committee is to ensure that the commercial contributor banks operate reliably and transparently in the inter-bank market. To that end, the Committee determines the definitions, the contributors and the rules for calculating and publishing the fixing Telbor interest rates. The Telbor Interest Rate Committee is comprised of three representatives - Bank of Israel, Forex Israel and the Tel Aviv Stock Exchange - who cooperate with full transparency, and set fair rules in line with the developing situation of the inter-bank market.

The Tel Aviv Inter-Bank Offered Rate (Telbor) is based on interest rate quotes by a number of commercial banks (hereinafter: the contributors) in the inter-bank market. It is published daily by Reuters. The algorithm for fixing the Telbor for each term to maturity averages the banks’ quotes after excluding outliers.

Telbor interest rates are also published by the Bank of Israel at the bank's website as a service to the general public. However, as stated before, the Telbor interest rates are not set by the Bank of Israel. It should be noted that Bank of Israel is not obliged to publish the rates on any specific day.

In recent years, there have been many developments in the market for futures contracts on the Telbor market. These are apparent in the growing volume of Forward Rate Agreement (FRA) transactions and Interest Rate Swap (IRS) transactions, in which valuation at expiration is based on the Telbor. Since the middle of 2010, Overnight Index Swap (OIS) transactions have also been carried out in Israel, this follows their inclusion in the framework of commitments to carry out transactions between contributor banks. Committee members are of the opinion that there is tremendous potential in the market for products based on the Telbor, which has not been realized.

 The commercial banks that operate in Israel began operating in the framework of the new guidelines at the beginning of  March 2007 (See list). The committee will monitor developments in the Telbor market, ensuring that the definitions and regulations that it has defined are being implemented by each of the contributor banks.

It is the Bank of Israel’s view, at this stage, that use of the Telbor interest rate is only appropriate for sophisticated investors, due to the complexity of the Telbor market.