FW’rs what is your take on http://www.israelbonds.com/Offerings-Rates/Current-Rates.aspx
10 or so years ago I worked as a tax accountant. One of the things I noticed was that many of our Jewish clients would buy Israel bonds for their children. At the time they carried about the same interest rate as they do currently (which wasn’t great for 2006). I recently remembered they and found their site. The rates now appear to be somewhat competitive (on the 5 year mazel tov bond at least 3.42%). I bought a minor $2500 of them as a test and things have gone smoothly so far.
There are some stipulations on these bonds though:
- They cannot be redeemed prior to maturity except in special circumstances
- They are OID bonds so there is no coupon payment and you will receive phantom income each year for tax purposes.
- Taxable both federal & state.
- Some credit risk if Israel has a giant war or is destroyed.
- They are USD denominated so no currency risk if shekel collapses.
Regarding credit risk. I honestly think it is more likely for USA to bail out Israel with any financial issues it may have than for USA to bail out its own territories of Puerto Rico/Virgin Islands.
This appears to be a program that was set up some time ago to market directly to the “Diaspora” and was prior to Israel having their public debt traded openly on exchanges. because whats strange is the official Israel government debt is only paying 1.77 for a 10 year right now so I’m not sure why this “Direct to consumer” program still exists.
Any thoughts on viability of these bonds as an investment? (please leave political beliefs out of discussion)