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Auctions for banking corporations’ sheqel time deposits with the Bank
of Israel
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In July 1996 the Bank of Israel began accepting local-currency time
deposits from banking corporations, as an additional monetary instrument making it possible to offset changes in the monetary base.
The deposits are accepted at a discriminatory auction for a period of one day, one week, one month, and 3 months. At the
auction, the banking corporations bid for the interest rate they
equire on the local currency to be deposited with the Bank of Israel.
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See results of Daily deposit uctions, Weekly deposit auctions, Monthly deposit
auctions, (and
3-month deposit auctions - Not active).
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| Average interest rate
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The interest calculated by weighting the interest rates paid or received by the banking
corporations at each auction by the relative amounts obtained.
See also
Interest calculations.
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| Average price |
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The price calculated by weighting the prices paid at each auction by the relative amounts obtained.
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| Closing interest rate |
The lowest interest rate bid successfully at the daily monetary loan auction, and the highest rate bid successfully at the auctions for banking corporations’ deposits, and
NIS/$ swap auctions.
See also Interest calculations.
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| Closing Premium |
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The lowest premium bid successfully at the dollar auctions.
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| Closing Price |
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The lowest price bid successfully at government bonds auctions. |
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| Closing Yield to Maturity
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The lowest yield to maturity bid successfully at treasury bills auctions. |
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| Discriminatory auction |
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An auction in which participants may bid different amounts at different terms of payment, according to the type of auction. Successful bidders pay for or receive the full amount they have offered or for which they have bid.
Successful bidders are as follows:For
monetary loans:
anyone who offers an interest rate, starting with the highest, and
ending with the closing rate.
For
banks’ deposits and
sheqel/dollar swaps: anyone who offers an interest rate,
starting with the lowest, and ending with the closing rate.
For Treasury bills,
futures, and government bonds/Treasury bills swaps: anyone who
offers a yield, starting with the lowest, and ending with the closing yield.
For government bonds:
anyone who offers a price, starting with the highest, and
ending with the closing price.
For foreign-currency options:
anyone who offers a premium, starting with the
highest, and ending with the closing premium.
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| Shekel-dollar options |
The Bank of Israel sells the public shekel-dollar options of the following kinds:
1. 6-month call options on the representative exchange rate of the US dollar. The purchaser receives the exchange-rate differential created if the representative exchange rate of the US dollar published by the Bank of Israel six months later is higher than the exercise price specified in these options.
2. 6-month put options on the representative exchange rate of the US dollar. The purchaser receives the exchange-rate differential created if the representative exchange rate of the US dollar published by the Bank of Israel six months later is less than the exercise price specified in these options.
The public is entitled to participate in the auctions on these options, which are generally held on a weekly basis, via the banking corporations.
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| Government Bonds Auctions |
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Government bonds are a security by means of which the government borrowscapital from the public in order to finance the budget deficit.These bonds are offered and sold to the public by the Bank of Israel at a discriminatory auction in which each successful bidder pays the price he has offered. The public is entitled to participate in these auctions via members of the Tel-Aviv Stock Exchange (TASE)-the banking corporations and brokers-and additional financial entities, as determined from time to time by the Bank of Israel, with the approval of the Ministry of Finance. The bonds are registered for trading on the TASE up to three business days from the day of the auction. Income tax on the indexed interest must be deducted at source from the interest on the bonds that are indexed to the CPI or the representative US dollar exchange rate.
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| Indexed bonds |
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The Bank of Israel offers bonds indexed to the Consumer Price Index (CPI) to the public.
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| CPI-Linked Bonds |
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| 1. Fixed Rate Bonds |
a. Sagi:
Indexed bonds bearing fixed interest that is paid annually,on the last business day of the payment month.The principal is paid on the last business day of The month in which the bond is redeemed.Both the principal and the interest are indexed to the CPI. These bonds were issued until November 1997 for terms of five and six years.The last series issued will be redeemable in January 2003.
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b. Galil:Indexed bonds bearing a fixed rate of interest that is paid annually,on the last business day of the payment month.The principal is paid on the last business day of the month in which the bond is redeemed.Both the principal and the interest are indexed to the CPI. These bonds may be issued for periods between two and thirty years
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| 2. Floating Rate Bonds
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a. Kfir: Indexed bonds, bearing a floating rate interest paid once every six months, on the last business day before the 21st of the payment month. The principal is paid on the last business day before the 21st of the month in which the bond is redeemed. Both the principal and the interest are indexed to the CPI.The interest is the weighted average of the gross daily yields (before tax)of tradable cpi-indexed government bonds at the financial value of each series in the hands of the public)with a term of between three and five years,during the two calendar months preceding the month in which the interest rate was changed.These bonds were issued for terms of seven, ten, eleven and a half,and twelve years.Kfir bonds wereissued until November1996. The last series issued will be redeemable in June 2003
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b. New Kfir: the main differences between these and the Kfir bonds are as follows:
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1. These bonds may be issued for terms of between one and twenty-five years
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2. The interest rate varies every three months and is paid on the last business day of payment month, on the basis of the number of days in the quarter.
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3. The interest rate is the weighted average of the gross daily yields (before tax) of CPI-indexed government bonds for terms of between two and five years in the ten trading days preceding the renewal of the interest rate. New Kfir bonds were issued until November 1999. The last series issued will be redeemable in January 2004. New Kfir bonds were issued for terms of six years.
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Dollar-Indexed Bonds
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Gilboa: Indexed bonds, bearing a floating rate of interest that changes at six-monthly intervals and is paid on the day the interest rate changes. The principal is paid on the day the bond is redeemed. Both the principal and the interest are indexed to the representative exchange rate of the US dollar. These bonds may be issued for terms of between two and twenty-five years. The interest rate on them equals the Libor rate on six-month dollar deposits,as published by Reuters two business days before the interest is renewed.
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Unindexed Bonds
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1. Fixed Rate Bonds
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Shahar: Unindexed bonds bearing a fixed rate of annual interest which is paid once a year, on the last bank business day of the month, on the basis of the number of days in that year. The principal is paid on the last business day of the month in which the bond is redeemed. These bonds may be issued for terms of between one and thirty years.
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| 2. Floating Rate Bonds |
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a. Gilon: Unindexed bonds with a floating rate of interest which is paid once every six months, on the last business day before the 11th of the payment month.The principal is paid on the last business day before the 11th of the month in which the bond is redeemed. The interest rate is the weighted average of the daily yields of Treasury bills (makam) (according to the financial value of each series in the hands of the public) with a term to maturity of between three months and a year in the two calendar months before the month in which the interest was renewed. These bonds were issued for terms of two, two and a half, three and a half, four, five, and seven years. Individuals, mutual funds, provident funds, further education funds, pension funds, and insurance firms are exempt from tax on the interest. Gilon bonds were issued until September 1998. The last series issued will be redeemable in April 2005.
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b. New Gilon:the main differences between these and the Gilon bonds are as follows:
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1. These bonds may be issued for terms of between one and twenty-five years.
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2. The interest rate varies every three months and is paid on the last bank business day on the basis of the number of days in the quarter.
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3. The interest rate is the weighted average of the daily yields of Treasury bills (makam) for terms of between three months and a year in the ten trading days ;;;preceding the month in which the interest rate is renewed.
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| Interest calculations |
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All the interest rates given here are percentages, on a simple annual basis. |
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| Loans at daily auction - Not active |
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The Bank of Israel publishes in advance the amounts and repayment dates of the corporations submit the amounts of loans they require to the Monetary Department at each interest rate, according to the following terms;
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The bids are submitted at interest-rate intervals of 0.1 percent; |
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The amount of the bids submitted by each banking corporation does not exceed the total amount of the loan offered at auction; |
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The interest rate offered is not lower than the minimum rate set by the Bank of Israel. |
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The interest rates will be set at the discriminatory auction: the interest rates paid by each banking corporation will be those offered by it at the auction for each amount it obtains.
Results of auctions.
See also Results of auctions.
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| Loans at quota |
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All the interest rates given here are percentages, on a simple annual basis.
A banking corporation is entitled to obtain monetary loans at quota to amounts and
at interest rates that are set by the Bank of Israel from time to time.
The allocation of the quotas among the banking corporations at each interest rate is
based on each corporation's share in the average reserve reqirement in local currency
during a predefined period.
A banking corporation may withdraw the monetary loan at quota each day, to an
amount that does not exceed the maximum amount of the quota, and may also repay the
outstanding loan at quota in full or in part. The interest on the monetary loan is debited
daily.
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| Maximum interest rate
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The highest interest rate at which bids may be submitted at Bank of Israel deposit
auctions.
See also
Interest calculations.
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| Minimum interest rate |
The lowest interest rate at which bids may be submitted at Bank of Israel loan auctions.
See also
Interest calculations.
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| Minimum price |
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The lowest price at which bids may be submitted at the auctions.
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| Monetary loans |
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The Bank of Israel makes monetary loans available to the banking corporations. The loans are extended under section 42 of the Bank of Israel Law, 5714-1954. Within the
framework of the arrangement, two kinds of loans are offered:
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Loans at quota
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Loans at daily auction
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| NIS/$ swap auctions |
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In August 1995 the Bank of Israel began using NIS/$ swaps as an additional
monetary instrument making it possible to offset changes in the monetary base. In a swap transaction, the Bank of Israel offers the banking corporations dollars for sheqels,
for a defined time (usually 28 days), at a
discriminatory auction, at the spot exchange
rate. When the agreed time limit is reached, the Bank of Israel buys the dollars back in
return for sheqels, at the original spot rate, plus the interest rate set at the auction. This
rate reflects the difference between the interest on the daily monetary loan and that on
the dollar.
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See Results.
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| Proportion allocated |
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This is calculated by dividing the outstanding amount to be allocated by the amount demanded at the closing interest rate, yield, price and premium.
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| REPO Auctions |
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The Bank of Israel sells Treasury bills to the public,by means of an auction,at a price that is uniform and known in advance, and buys them back from the successful articipants in the auction after a period that is defined in advance before each auction. During the auction the difference between the price at which the Bank of Israel sellsthe Treasury bills and at which it will repurchase them is defined for each buyer.
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| Treasury bills (makam) |
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Treasury bills (makam) are government securities issued by the Bank of Israel. They constitute one of the instruments whereby the Bank manages the interest-rate policy in order to attain the long-term inflation targets set by the government. Treasury bills may be issued for periods of up to a year, are not indexed, and bear no interest. They may consequently be sold and traded at a price below their face value (disagio). Treasury bills are sold at a discount. Tax on the discount will be included in the context of taxation of capital gains for which the rules of tax deduction at source have not yet been determined. Treasury bills are offered and sold to the public by the Bank of Israel in three ways:
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1. A discriminatory auction, in which each successful bidder pays the price he has offered; participants compete for the yield on Treasury bills, which is conveyed to them at the end of the auction. reasury bills can also be bought without restriction on the yield, up to a prescribed and published amount, and the amount requested will be supplied to the successful bidders at the average yield at theauction.
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2. A discriminatory auction, in which the participants compete for the yield on the Treasury bills, which is conveyed to them three months after the auction. This transaction is known as future Treasury bills.
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3. A discriminatory auction, in which the participants compete for the yield on the Treasury bills, which is conveyed to them at the end of the auction. In this auction, known as a swap auction, the successful participants pay the Bank of Israel for the Treasury bills by handing over series of CPI-indexed government bonds that have been specified in advance by the Bank of Israel. These auctions are generally held each week. The public may participate in them directly orvia a member of the TASE-the banking corporations and brokers-provided the extent of the purchase has a face value of not less than NIS 1,000,000. The Treasury bills are registered for trading on the TASE on the first business day after the auction day.
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Method of sale and trading
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Treasury bills are offered to the public and sold at a discriminatory auction. Bids in terms of the annual yield to maturity are submitted via a communications network. The amount to be offered at the auctions is published in the press and communicationsnetworks several days prior to the date of the auction. Members of the TASE, which includes most of the banking corporations and brokers, may participate in the auction. Treasury bills from the series offered may be purchased without any limitation on yield, up to the amount published; the entire amount requested will be supplied at the average yield. Private customers may participate in the auctions provided they purchase Treasury bills to the value of at least NIS 1 million. Auctions are held every week, at 12.30 on Tuesday. Treasury bill series offered at auction are listed for trading on the TASE on the first trading day after the day of the auction. Treasury bills are traded daily on the TASE, and about 15 series are traded currently; 6 series are offered for periods of up to 3months, and 9 for periods of between 3 and 12 months.
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