Mizrahi Tefahot Strategist Links High US Bond Yields to AI Boom and Israeli Market Recovery
Mizrahi Tefahot Bank's chief strategist Yoni Fening outlines economic trends, linking high US bond yields to AI investments while noting a steady recovery in Israeli local activity and high-tech service exports.
US Bond Yields and Artificial Intelligence Impact
Yoni Fening, Chief Strategist at Mizrahi Tefahot Bank, released his weekly economic review, highlighting that US bond yields remain unusually high due to monetary factors and term premiums, even across 5-year horizons.
While fuel prices and refinery costs show high historical pass-through, they struggle to fully explain the surge in yields for linked instruments. Instead, the artificial intelligence sector offers a more plausible explanation, supported by yield correlations with leading AI model developers' revenue expectations and a consistent increase in US electricity production over the past two years driven by AI Capex investments.
Israeli Economic Activity Recovery
In Israel, indicators point to rising local economic activity throughout September, mirroring credit card data trends. This momentum stems notably from the supply side, as reflected in business trend surveys, and surprisingly from robust foreign demand.
Consumer confidence indices are also signaling a recovery. Meanwhile, high volumes of outbound flights in September are expected to moderate seasonal price declines within the sector.
High-Tech Service Exports Growth
"Local service exports showed moderation in July following a surge in June, with the majority originating unsurprisingly from the high-tech sector. Nevertheless, this series continues to grow at a high annual pace of approximately 10%, aligning with the multi-year average."
Despite the July cooling off period following a sharp June jump, Israel's high-tech service exports maintain solid annual expansion, underpinning overall macroeconomic resilience.