The financial data in the Bank of Israel prove: The bond purchase plan is unnecessary

In July, the Bank of Israel, headed by Governor Prof. Amir Yaron, announced a new incentive program - the purchase of corporate bonds for NIS 15 billion, against the background of a similar program implemented by the US Federal Reserve. The Bank of Israel focused on the bonds of strong companies, with a credit rating of A minus or higher. The idea was that support for strong companies would also permeate weaknesses by reducing all risk margins in the market.
Already at the time of the announcement, the Bank of Israel's plan was criticized. Among other things, it was argued that there is no liquidity shortage in the market, and that the companies do not have difficulty raising in any case. Critics further argued that despite the opening of risk margins in March, the corporate market had already managed to correct a significant portion of the falls, and yields on the Tel Bond indices had almost returned to their pre-crisis levels.
In September, the Bank of Israel accelerated its intervention, purchasing corporate bonds worth NIS 1.2 billion, following acquisitions of NIS 300 million in August and NIS 600 million in July. The corona.
Even after September, the volume of purchases by the Bank of Israel in the corporate market is very low - NIS 2.1 billion - 13% of the total plan. This is a relatively marginal and minor intervention in relation to the volume of trading in the corporate market. For comparison, in September and August the bank purchased government bonds for NIS 10 billion - that is, five times as much.
As the numbers on the ground prove, the Bank of Israel does not currently identify any special failures in the corporate market. Indeed, the risk margins in the corporate market are currently close to their level in 2018–2019, when most companies have no difficulty raising debt. The low margins are related to the fact that many companies on the stock exchange have reached a crisis in better financial condition than ever, after a decade of market turmoil, and also to the fact that the focus of the crisis is small, independent businesses that are not on the stock exchange at all.
The main contribution of the Bank of Israel's plan is probably in the message that the Bank conveyed to the defense network that it will give to the corporate market in the event of a deterioration. However, the intervention of a central bank - even if it is sponsored by a similar intervention of the Fed - could create long-term damage to the market, mainly harming the players' considerations, and providing indirect support to the bad companies, which probably did not deserve to survive the crisis.
The Bank of Israel stated: "Part of the role of monetary policy is to act even before risks materialize. From the outset, it was clarified that intervention in the corporate market will be measured and as necessary, given the structure and functioning of the market. "Desires for issues of companies in the billions of shekels, which in addition also provided additional sources of financing for companies outside the market."