"...Since October 2023, Israel Bonds has raised over $5 billion in the United States, largely from local governments and public employee pension funds across the country. Along with Arkansas, investors include Texas, New York, California, Ohio, Louisiana, Mississippi, Oklahoma and South Carolina.
The bonds purchased by Arkansas and other states are issued by the Development Corporation for Israel, an organization legally separate from but closely affiliated with Israel’s Ministry of Finance. It is often called “Israel Bonds” for short. The bonds are backed by the full faith and credit of the Israeli government and are not earmarked to specific expenditures, meaning the funds raised by their sales can be used at the discretion of the state.
Notably, the bonds sold by the Development Corporation for Israel are illiquid: They cannot be traded in secondary markets, and the original buyer must hold them until maturity. This is in contrast to many other commonly held fixed-income debt securities, like U.S. Treasury bonds, and for this reason, the bonds typically have higher interest rates than other, liquid bonds.
All three credit rating agencies have assessed Israeli bonds to have a “negative outlook,” reflecting a high likelihood of future downgrades. The lowest rating among the Big Three is from Moody’s, which in September 2024 downgraded Israeli bonds from “A2” to “Baa1” with a negative outlook. A debt instrument with a Moody’s Baa1 rating is still considered “investment grade,” rather than “speculative grade,” though it “may possess speculative characteristics.”
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