Asset AllocationOctober 18, 2023

At Least 8 States Buy Israeli Bonds Totaling More Than $100M to Support War Against Hamas

Moody’s warns that a prolonged conflict could hurt the country’s credit rating.

Reported by Michael Katz

At least eight U.S. states have bought or pledged to buy more than $100 million worth of Israeli bonds since the country declared war against Hamas following a brutal surprise attack on October 7 that killed a reported 1,400 Israelis, including many civilians. States that have publicly committed to or bought bonds include Arizona, Florida, Georgia, Illinois, New York, Ohio, Pennsylvania and Texas.

Florida Chief Financial Officer Jimmy Patronis announced last week that the Florida Treasury will invest an additional $25 million in Israeli bonds to raise the state’s total current investment to $80 million, which Patronis identified as the largest total held at one time by Florida.

“Florida and Israel have deep economic and personal ties, and our state unequivocally stands with Israel,” Patronis said in a release. “This historic investment increases our state’s Israel bond portfolio to more than $80 million and not only provides Florida with a strong investment but also further fortifies Florida’s commitment to stand with and support Israel.”

The $254.1 billion New York State Common Retirement Fund bought an additional $20 million in Israel bonds to raise its Israeli bond holdings to $267.8 million.

“New York state’s pension fund buys Israel bonds because we have confidence in the spirit of innovation and tenacity of Israeli people and in the strength of our investments there,” New York State Comptroller Thomas DiNapoli said in a release. “In addition to providing a steady return for our pension fund’s members, Israel bonds help support one of our nation’s strongest allies.”

The comptroller’s office said the Israeli bonds purchased by the NYSCRF have a 10-year maturity with a coupon of 5.96%, which it identified has a spread of 138 basis points over the 10-Year Treasury at the time of purchase. The NYSCRF also stated that the pension fund has approximately $1.5 billion in total investments in Israel among all asset classes.

“The extent to which New York has supported Israel is incredible, aligning with the immediate response across many U.S. states during this crucial period for the Jewish state,” Israel Bonds President and CEO Dani Naveh said in a release. “At a time when Israel is under attack, these investments represent the most powerful and direct way to stand with the State of Israel and its people.”

Pennsylvania Treasurer Stacy Garrity also announced last week that the Pennsylvania Treasury Department is making a new $20 million investment in Israeli bonds. She said the additional investment will raise the state treasury department’s Israeli bond holdings to about $56 million.

“Israel bonds are a smart, dependable investment with a proven track record,” Garrity said in a release.

Ohio is also boosting its investment in Israeli bonds by $20 million to bring its total investment to $187.5 million. Treasurer of State Robert Sprague said the state plans to purchase $20 million in fixed-rate Israeli bonds that mature in five years with an interest rate of 5.74%.

“For 30 years, Israel Bonds have been—and continue to be—a strong investment for the Ohio Treasury,” Sprague said in a release.

Texas also announced plans to buy $20 million worth of Israeli bonds, and, like Ohio, also bought the five-year fixed-rate bond at 5.74%. Texas Comptroller Glenn Hegar said the new investment would bring Texas’ total holding of Israeli bonds to nearly $100 million.

“The state of Israel is a solid investment,” Hegar said. “For nearly 30 years, Israel bonds have been a key component of our investment portfolio at the state’s treasury, providing a reliable return for the people of Texas.”

Illinois State Treasurer Michael Frerichs announced the state will invest $10 million in Israeli bonds. Frerichs, like many of the other state treasurers, noted that Israel has never defaulted on its bond payments in more than 70 years. However, that reliability could be tested, according to Moody’s; the ratings agency warned just prior to a planned rating review for Israel that a prolonged war with Hamas could hurt the country’s credit score.

“An escalation of military action that is accompanied by widespread sanctions would test the resilience of global credit conditions already strained by higher rates and slowing growth,” the Moody’s report stated.

Georgia Governor Brian Kemp said last week that he instructed the state’s treasurer to buy $10 million in bonds from Israel, which Kemp said was the highest amount available on the market at the time. With the new investment, Georgia will hold a total of $25 million worth of Israel bonds.

On Monday, Arizona Treasurer Kimberly Yee announced that the state plans to increase its Israeli bond holdings; however, she did not specify an amount. The Arizona State Treasurer’s Office currently holds $15 million worth of Israel bonds.