MAKAM

What is a MAKAM?

A MAKAM is a short-term security issued to the general public by the Bank of Israel and traded on the Tel Aviv Stock Exchange. The MAKAM has a face value of 100 agorot and does not bear interest, but it is sold at a certain discount on its face value. The return on the MAKAM at the end of one year is the difference between the discounted price at which the MAKAM was bought and its face value.  MAKAM are a tool used by the Bank of Israel to manage monetary policy.

What are the advantages of MAKAM?

 

• MAKAM is considered a risk-free investment channel, with a yield that is known in advance.
• MAKAM is a tradable asset that can be bought and sold on any business day on the Tel Aviv Stock Exchange.
• Investment horizon - MAKAM is issued for periods of  one year, and allow for flexibility in the investment period. Every month a new MAKAM is issued with a lifetime of one year, so at any time it is possible to choose from 12 existing series with different maturity dates.

So how do you invest in MAKAM?

Open a securities account at a bank or an investment house, deposit the amount you wish to invest in MAKAM and issue a buy order.  MAKAM can be purchased through a tender auction at its issuance (primary market), or during the trading hours on the stock exchange (the secondary market).

 

What else should you know about investing in MAKAM?

 

• A new MAKAM series is issued each month, such that at any given time, there are 12 MAKAM series being traded with a term of up to 1 year.
• The taxation on MAKAM is only 15% and not 25% as is customary with other securities
• MAKAM yields are derived from the market's expectations of what the Bank of Israel interest rate will be at various ranges.  For instance, if the 1-year MAKAM yield is lower than the current Bank of Israel interest rate, it shows that the market expects the Bank of Israel rate to decline over the coming year.