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Israel was downgraded by a notch from A+ to A by Fitch. The downgrade reflects the impact of continuation of the war in Gaza, leading to increased geopolitical risks. Due to the war, public finances of Israel have been hit, and as a result Fitch projects a budget deficit of 7.8% of GDP in 2024 and a debt-to-GDP ratio of above 70% in the medium term. According to Fitch, the conflict could last well into 2025 resulting in significant military spending, destruction of infrastructure and more sustained damage to economic activity and investment, leading to further deterioration of Israel’s credit metrics. S&P had downgraded Israel to A+ earlier in April this year, citing similar reasons.
Israel’s bonds traded stable with its 7.25% 2028s at 106.7 cents on the dollar, yielding 5.51%.