Economy brief
Record Reserves and Resilient Spending Face US Yield Headwinds
Foreign exchange reserves hit a $241 billion record and summer card spending surged, while rising US bond yields threaten dual-listed Israeli tech valuations.
Economy
Record $241 billion reserves give the Bank of Israel massive currency intervention power — protecting the shekel from geopolitical shocks.
BackgroundThe Bank of Israel maintains foreign currency reserves to buffer the domestic economy against geopolitical shocks and shekel volatility. Reserves expand through international asset revaluations, government currency transactions, and central bank open-market operations.
- Market portfolio revaluations contributed $2.59 billion to August's reserve expansion alongside $330 million in government currency transfers, widening central bank policy flexibility.
- The record reserve cushion gives Governor Amir Yaron substantial firepower to stabilize the shekel during regional security escalations, shielding local markets from sudden capital flight.
- Large institutional banks including Bank Leumi and Bank Hapoalim benefit from central bank liquidity stability amidst global market swings, underpinning domestic systemic stability.
Economy
Record ₪109 billion summer credit card spending shows resilient Israeli consumer demand — though inflation accounts for part of the gain.
BackgroundShva processes all credit card transaction clearing across Israeli retail, dining, and travel networks. Summer card spending in Israel has grown by over 40% over the last four years, reflecting a steady shift away from physical currency.
- ATM cash withdrawals remained flat at ₪5.9 billion, proving nominal spending growth reflects digital payment adoption rather than expanding physical cash usage.
- Strong card transaction volumes supported retail revenue growth for major domestic supermarket chains including Shufersal, insulating local consumer shares from broader economic drag.
- Economists caution that spending growth is partly driven by domestic price inflation across consumer goods and services, masking underlying volume stagnation in lower-income households.
Economy
Surging US payrolls and hawkish Fed projections raise global borrowing costs — hitting dual-listed Israeli tech valuations and pension returns.
BackgroundIsraeli tech companies dual-listed on Nasdaq and Tel Aviv depend on low global discount rates to support enterprise growth valuations. Higher US Treasury yields reduce the present value of future earnings, hitting high-multiple growth equities.
- Futures markets priced in a 60% chance of a Fed rate hike, with investment bank UBS forecasting two rate hikes in 2026.
- Menora Mivtachim warned that rising global yields could trigger equity market pullbacks, directly impacting Israeli pension funds holding heavy foreign stock allocations.
- US 10-year yields approaching 4.81% increased borrowing costs for Israeli technology firms seeking overseas debt financing, depressing growth expectations.
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