Debt Developments in the Economy, June–July 2012
Business sector debt increased by NIS 1.4 billion (0.2 percent) to about NIS 792 billion in June. Households' debt increased in June by about 0.4 percent, to about NIS 374.6 billion.
The business sector's outstanding debt
· The total outstanding debt of the business sector increased in June by about NIS 1.4 billion (0.2 percent) to about NIS 792 billion.
· The increase derived mainly from the effect of the depreciation of the shekel against the dollar, which increased the shekel value of foreign currency debt. In addition, about NIS 1.9 billion was raised through bank loans; these were offset by tradable bond redemptions at a similar amount.
· In July, the business sector (excluding banks and insurance companies) issued about NIS 3.7 billion of bonds, nearly all of which was tradable. Bond issues since the beginning of the year average about NIS 2.4 billion a month.
· Households' outstanding debt in June was NIS 374.6 billion. The balance of housing debt increased by about NIS 1.6 billion (0.6 percent), and at the end of June stood at NIS 267.1 billion. Since the beginning of 2012 the outstanding housing debt has increased by NIS 8.5 billion (3.3 percent).
· New mortgages taken out in July totaled about NIS 4.9 billion, compared with 3.9 NIS billion in June. The figure for July is about NIS 1.5 billion higher than the average per month (NIS 3.4 billion) in the first half of the year. It should be noted that June and July generally see an increase in new mortgages taken out, and the July figures may have been affected by the decision on VAT increase.
The cost of the debt
· The spread between interest on credit and interest on indexed deposits widened by 0.6 percentage points in June, due to an increase in the interest rate on indexed credit and a decline in interest on indexed deposits. In the unindexed sector, there was no significant change in the spread between interest on credit and interest on deposits.
· There was an increase of 0.4 percentage points in the gap between the yield on indexed corporate bonds—the Tel-Bond 60 Index—and average yields on indexed government bonds, reaching 3.2 percentage points at the end of June. This, after a cumulative increase of 1.5 percentage points in this spread in the 12 months which ended in July 2012.
· The average interest rate on new unindexed mortgages declined by 0.2 of a percentage point in July, in line with a decline in the Bank of Israel interest rate. The average interest rate on new CPI-indexed mortgages declined by 0.03 percentage points.
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