TA-90 Index Surges 5.5% as Bank of Israel Rate Cut Reinvigorates Real Estate
The Tel Aviv Stock Exchange reported a 5.5% surge in the TA-90 index following the Bank of Israel's interest rate cut to 3.25%. Real estate stocks led the gains, while Bank Hapoalim raised 1.8 billion NIS in corporate debt.
The Tel Aviv Stock Exchange (TASE) Research Unit has summarized the shortened trading week in Israel and Wall Street, highlighting a major shift in investor preferences following the Bank of Israel's decision to cut the benchmark interest rate to 3.25%.
According to the TASE report, this rate cut redirected demand toward interest-rate-sensitive shares. While the TA-125 index rose by 2.9% and the TA-35 index added 2.2%, the TA-90 index outperformed with a 5.5% surge, the highest among the flagship indices.
Real Estate Drives TA-90 Surge
The sharp rise in the TA-90 index was primarily supported by a jump in real estate and construction stocks, which hold a significant weight in the index. This surge came amid assessments that a lower interest rate environment will help reduce financing costs and support the recovery of economic activity. After a prolonged period of underperformance relative to the leading indices, investors are gradually returning to mid-cap companies, identifying them as prime beneficiaries of the ongoing rate-reduction process.
Bond Market Divergence
The Bank of Israel's decision to lower the interest rate by 0.25% continued to support the domestic debt market, particularly in the short- and medium-term segments and the corporate bond market. However, rising US Treasury yields alongside fears of renewed security escalation put pressure on long-term Israeli government bonds.
The yield on the 3-year Israeli government bond fell from 3.549% to 3.522%, while the yield on the 10-year government bond rose from 3.829% to 3.881%.
Corporate Debt and Mutual Funds
The corporate debt raising market saw limited activity this week. Bank Hapoalim led the banking sector's issuance activity, raising approximately 1.8 billion NIS across two new series:
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Series 107: Raised approximately 821 million NIS at a spread of 0.2%.
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Series XVI (Deferred Liability Notes): Raised approximately 1 billion NIS at a gross interest rate of 2.7%.
In the mutual funds market, net inflows reached approximately 1.65 billion NIS, with demand focused on passive funds. Funds investing in the local stock market recorded net inflows of 736 million NIS, led by TA-125 funds (394 million NIS) and TA-90 funds (310 million NIS). TA-Construction funds raised 84 million NIS, driven by the sharp gains in real estate stocks. Additionally, Tel Bond funds recorded net inflows of 124 million NIS this week (bringing year-to-date inflows to 4 billion NIS), while money market funds experienced minor net redemptions of 163 million NIS.
