J.P. Morgan estimates: What will happen in the elections, and how will Israel's bonds be affected? | Watch
J.P. Morgan estimates that the central scenario after the elections is that no government will be formed, but believes such a situation is not expected to harm the bond market in the short term due to a continuing budget. Conversely, prolonged political instability could increase the risk premium. The bank identifies opportunities in bond spreads and prefers long positions in interest rate swaps.
A day before the elections in Israel, investment bank J.P. Morgan published a review estimating that the central scenario is that no government will be formed following the elections. However, the bank believes that a political stalemate is not expected to harm the government bond market in the short term, as the absence of a government to approve a new budget may lead to management through a continuing budget, which will limit government spending. Conversely, prolonged political instability could increase Israel's risk premium. The review notes that market opinions are divided, and any significant movement will present an opportunity to act against it. The review also addresses the Bank of Israel's decision to keep the interest rate at 3.25% with a hawkish tone, and inflation standing at 1.6%. The bank identifies opportunities in government bond spreads and prefers long positions in spreads versus interest rate swaps, especially in the ten-year range.