Israel's Diaspora Bonds in Response to War with Hamas

SOURCE npr.org
Israel's war with Hamas has led the country to sell $2 billion worth of diaspora bonds, a unique type of bond sold to individuals living overseas who feel a connection to their country of origin. These bonds have been used as a fundraising tool since 1951 and have been successful in raising funds during emergency situations like the start of the pandemic and after the Hamas attacks.

Key Points

  • Israel's diaspora bond program started in 1951 for infrastructure and development
  • During emergency situations like the pandemic and Hamas attacks, Israel paid lower interest rates on diaspora bonds
  • Illinois has been purchasing Israel bonds for over 20 years, seeing them as a low-risk investment and a way to support an ally

Pros

  • Diaspora bonds provide a way for countries to raise funds from individuals living overseas
  • Buyers of diaspora bonds are often motivated by loyalty and charity

Cons

  • Israeli diaspora bonds have at times paid slightly higher rates of interest than standard government bonds
  • The patriotic discount theory for diaspora bonds does not always hold true