The Israeli capital market entered a new era this week as the Tel Aviv Stock Exchange (TASE) successfully implemented its long-awaited transition to a Monday-through-Friday trading week. This structural realignment, designed to synchronize Israel with international financial hubs, coincided with a powerful rally that pushed the TA-125 Index to a record-breaking close of 3,907.26. Against a backdrop of stabilizing macroeconomic data and a successful multi-billion dollar bond issue, the week’s performance highlights a significant shift in investor sentiment toward the Israeli capital market.

Strategic Shift to Friday Trading Enhances Liquidity

The move to eliminate Sunday trading in favor of Fridays marks a strategic milestone for the TASE, aimed at reducing the “Sunday Gap” and fostering real-time participation from global institutional investors. Market analysts suggest that this alignment is a critical step toward ensuring Israeli securities are more prominently featured in leading global indices. The immediate market reaction was bullish, with the TA-125 climbing steadily from its Monday opening to touch a daily high of 3,915.92 on Friday. This transition is expected to increase liquidity and broaden the investor base, as foreign funds can now manage their Israeli holdings in tandem with Wall Street and European markets.

Fiscal Strength and Bond Market Success

A major catalyst for the week’s upward momentum was the overwhelming success of a new government bond issue, which saw orders totaling $36 billion for a $9 billion offering. This massive oversubscription, coming from 300 investors across 30 countries, indicates that global markets increasingly perceive Israeli assets as undervalued. The bond issue was priced at its lowest spread since before the war, reflecting a belief in Israel’s fiscal stability despite elevated defense spending. This capital influx has provided a supportive floor for equity indices, as risk premiums, measured by CDS spreads, have returned to near pre-war levels.

Sector Performance and Corporate Highlights

Sector-wide gains were led by Technology, Banking, and Biomed firms. On the final trading day, Tower Semiconductor surged 4.82%, while major banks like Poalim and Leumi saw gains of 2.20% and 1.24% respectively. While defense stocks like Elbit Systems experienced a moderate pullback of 2.35%, the overall breadth of the market remained positive, with advancing stocks significantly outnumbering decliners. This diversified growth across the TA-125 constituents suggests that the current rally is supported by broad economic recovery rather than isolated sector spikes.

Looking ahead, the outlook for the TA-125 is bolstered by the Bank of Israel’s revised GDP growth forecast of 5.2% for 2026. Investors should closely monitor the March budget approval process, as the current interim budget remains a point of fiscal scrutiny. While geopolitical risks and labor market tightness persist, the combination of lower interest rates—which the Monetary Committee held at 4% this week while signaling a downward path—and the new global trading alignment presents a strong opportunity for sustained capital appreciation. The next major milestone to watch will be the January 19 publication of monetary discussion minutes, which may provide further clues on the pace of future rate cuts.