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Debt Developments in the Economy – April–May 2011

By Bank of IsraelJun 26, 2011 09:36AM ET
In April, the business sector's outstanding debt increased by about 0.5 percent to NIS 771 billion. Households' balance of debt increased by about 0.3 percent this month and was NIS 347 billion at the end of April. Outstanding housing credit included in that figure rose about NIS 2 billion.

A. The business sector's debt

The Information and Statistics department said that in April the balance of business sector debt increased by NIS 3.5 billion (0.5 percent) to NIS 771 billion.

The source of the increase in debt was net issuing of bonds in Israel and credit from banks that sum up together to NIS 7 billion. These were offset in part by the influence of appreciation of the shekel which reduced the shekel value of the debt balance by NIS 3 billion.

In May, the business sector (not including banks or insurance companies) issued about NIS 2.3 billion in debt, all of it as negotiable debt. Since the beginning of 2011, business sector issues have totaled about NIS 14 billion, about 82 percent as tradable bonds on the Tel Aviv Stock Exchange.

B. Household debt

The balance of household debt increased by NIS 1 billion this month and reached NIS 347 billion at the end of April.

The balance of housing credit included in total household debt rose by NIS 2 billion (0.8 percent) to NIS 243 billion at the end of April. Since the beginning of the year, the balance of households' housing credit has increased by 4 percent.

There was a drop of NIS 1.1 billion in volume of new mortgages granted in April, for a total of NIS 3.6 billion. The average monthly volume (net new mortgages taken out) since the beginning of 2010 has been NIS 4 billion.

C. The cost of the debt

In April, the spread between interest on credit and interest paid on deposits was unchanged in the unindexed sector, as a result of a similar rise in interest on credit and in interest on unindexed deposits.

In April, the spread between the return on the index of indexed corporate bonds (the Tel-Bond 60 Index) and the average return on indexed government bonds widened by 0.2 percentage points and reached 1.4 percentage points. It should be noted that since July 2010, there has been a trend of decline in the spread.

Interest on new unindexed mortgages rose in recent months in parallel to a rise in the Bank of Israel interest rate and in the return on unindexed bonds in the market. There was a rise in interest on mortgages indexed to the CPI in parallel to the return on indexed bonds.

For links to Information and Data on the Bank of Israel website
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