Debt Developments in the Economy, January–February 2015

Monthly outstanding business sector debt increased by about 1.6 percent in January, to NIS 826 billion, a significant increase compared with recent years.

01/04/2015

Graphs & Data

Monthly outstanding business sector debt increased by about 1.6 percent in January, to NIS 826 billion, a significant increase compared with recent years.

Outstanding household debt increased by about NIS 1.8 billion (0.4 percent), to about NIS 440 billion at the end of the month. Housing debt and nonhousing debt increased at similar rates of about 0.4 percent.

The business sector’s outstanding debt

· The total outstanding debt of the business sector increased by about NIS 13.3 billion (1.6 percent) to around NIS 826 billion in January. The increase derived mostly from taking out bank loans totaling about NIS 9.1 billion, a significant amount of new debt raised compared to the net repayments of the previous two years. In addition, net new debt was raised through nonbank loans, nontradable bonds in Israel, and loans from abroad. The increase in outstanding debt also derived from the effect of the depreciation of the shekel vis-à-vis the dollar. The increase in outstanding debt was partially offset by net repayments of tradable bonds in Israel and by the effect of the decline in the Consumer Price Index by about 0.9 percent, which lowered the value of CPI-indexed debt.

· In February, the business sector (excluding banks and insurance companies) issued about NIS 2.7 billion in bonds, all of which were tradable bonds. matching the average amount of issuances over the past 12 months.

Table 1: The Composition of Business Sector Debt

Figure 1: Rate of Change (Year on Year) in the Business Sector's Bank and Nonbank Debt

Table 2: Debt by Indexation

Figure 2: Business Sector Bond Issuance

Household debt

· Households’ outstanding debt increased by about NIS 1.8 billion (0.4 percent), to about NIS 440 billion, in January. Of that, the balance of outstanding housing debt increased by about NIS 1 billion, to about NIS 304 billion at the end of January.

· In February, new mortgages taken out totalled about NIS 4.6 billion, similar to the figure for the previous month (see Figure 3).

Table 3: Outstanding Debt Balances of Households

Figure 3 :Total Housing Credit from Banks, According to Indexation: New Mortgage Volume

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 increased by about 0.02 percentage points in January, compared with the previous month, as a result of the higher increase in the interest on indexed credit than the increase in the interest on deposits.

· In January–February, 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 1.77 percentage points.

· In February, the average interest rate on new unindexed mortgages (variable-rate interest) declined by about 0.06 percentage points. The average interest rate on new CPI-indexed mortgages (fixed interest) remained unchanged.

Table 4: The Cost of the Debt