The Israeli financial system faces significant risks of falling US bond yields and high global debt, the Israeli bank said on Sunday in its half-yearly financial stability report.
The central bank noted that the global growth and growth rate continued to decline in the first half of 2019, while major central banks stopped the downward trend in cash settlement that prevailed in 2018.
This has led to reversal of US dollar bond yield curves, and the Israeli Bank has warned that lowering credit quality would be reduced, global property prices would drop sharply and lead to significant tightening of the global financial environment, affecting the Israeli market.
"This effect, if it occurs, will mainly be felt through the financial channel, in particular due to the high correlation between the capital market in Israel and abroad, and may have significant consequences on the cost of financial assets in Israel and fall. in the desire to take on financial risks, "the central bank reported.
"Therefore, the potential for infection through the financial markets remains significant."
He added that the liquidity risks increased due to the smaller volume of trading and the large share of corporate bonds of mutual and other liquid assets.
"If a global crisis is developing, all this can increase the intensity of asset price decline," the report said, pointing out that the volume of global investment in Israeli companies, especially in the communications and computer services industry, is also a global risk exposure channel. "
The central bank warned of a higher credit risk of the government due to the budget deficit – currently at 3.8% of GDP annually – well above its target.
The statement states that real estate market risks fell in the past half year, with a slight decline in housing prices, but the bank urged the government to increase investment in housing construction to prevent future difficulties that would hurt the entire economy.
Reporting Steven Scheer; Editing Alexander Smith