The corporate bond market has reached a record size of approximately NIS 422 billion, yet about 90% of the Bond series included in the Tel-Bond universe record an average daily trading volume of less than NIS 2.4 million.
The Tel Aviv Stock Exchange (TASE) is publishing today a “Call for Public Comments” examining a significant methodological change in its bond indices. This initiative follows the successful launch of the equity‑index liquidity reform in November 2023, which led to a substantial improvement in the tradability of companies included in the indices. TASE now seeks to apply the proven track record and adapt them to the unique characteristics of the Israeli bond market.
The Gap Between Market Growth and Actual Liquidity
Israel’s corporate bond market is experiencing a period of expansion, with high issuance volumes and a total market value of approximately NIS 422 billion for bonds listed for trading (included in the Tel‑Bond universe). In parallel, the bond‑index and active bond‑fund industries have grown significantly, with local bond indices now tracking more than NIS 60 billion.
However, liquidity in corporate bonds remains insufficient:
- About 90% of Bond series in the Tel‑Bond universe record an average daily trading volume of less than NIS 2.4 million during real Time trading.
- About 50% of these series record an average daily trading volume of less than NIS 1 million.
Key Proposal: Liquidity as a Threshold Condition
The rationale behind the proposed methodological change is to ensure that fund managers and investors can operate efficiently within the indices. Under the proposal, minimum liquidity thresholds would be established as mandatory conditions for inclusion and continued presence in the bond indices. These conditions are expected to improve bond liquidity and enhance the ability of fund managers to track the indices, thereby significantly benefiting investors, reducing the effective cost of purchasing index‑tracking products, and meaningfully lowering volatility.
As part of the Call for Public Comments, bond series that do not meet the required liquidity thresholds may choose to join TASE’s market‑making program, enabling them to remain in—or be added to—the relevant indices.
