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Companies have sold $14.6 billion of bonds this year through Nov. 20, up from $8.7 billion in the same period of 2013, according to bourse data. New York real-estate firms, including Extell Development Co. and Zarasai Group Ltd., have joined the boom, issuing a total of $436 million. It’s now about 0.12 of a percentage point cheaper for borrowers to sell bonds in shekels and convert to dollars than it is to issue in greenbacks directly, data compiled by Bloomberg show. A year ago, shekels were about 0.69 percentage point costlier to borrow.

Attractive borrowing costs and investor demand for higher- paying debt securities are luring foreign issuers. Buyers have responded by pouring into Israel’s $86 billion corporate bond market, driving the Tel Aviv Bond 40 Index to near a record. New York-based companies benefit from Israeli traders’ familiarity with that market and increased interest for deals that may be considered small in the U.S., according to Israel Shimonov, founding partner at Shimonov & Co. Advocates.

“Institutional investors and pension managers are thirsty for investment as money in the bank hardly yields anything,” Shimonov, whose firm has helped U.S. real-estate companies issue bonds in Israel, said in an interview this month. “The government does not issue enough bonds, and equity listings are limited.”

Benchmark Rate

The surge in issuance comes as the TASE is trying to reverse a dearth of new equity offerings on Israel’s only bourse. At the same time, government notes and the Tel Aviv 25 Index have soared, pushing investors to look for future income in corporate debt. The benchmark index fell 0.1 percent to 1,472.56 at 2:56 p.m. in Tel Aviv.

The cost of borrowing in shekels has dropped as the Bank of Israel lowered the benchmark interest rate 12 times since 2011 to a record. Initially combating the currency’s appreciation amid offshore natural gas findings, policy makers continued cuts in an attempt to revive economic growth after the 50-day Gaza war in July and August.

The average premium of the Tel Aviv Bond 60 Index over indexed government notes was about 1.5 percentage points last month, according to Bank of Israel data. The spread touched a low of 0.99 percentage point in May.

“Nobody is coming to Israel because of pretty eyes,” Shimonov said. “The underlying economics works for them.”

Debt Swap

Local investors are attracted to the U.S.-based issuers for their yield and the chance to spread bond holdings beyond Israel, according to Yair Lapidot, founder and chief executive officer of Tel Aviv-based Yelin Lapidot Investment House. His firm is the biggest holder of Extell’s 0.1 percent sinkable notes maturing in December 2019, according to data compiled by Bloomberg.

“This is a chance to diversify our investments in real estate outside Israel,” Lapidot, whose firm manages 44 billion shekels, said by phone on Nov. 26. “This is not a hit-and-run. We expect these companies to keep the relationship going and stay in touch with us.”

Gary Barnett’s Extell, the developer of one of the tallest residential buildings in New York on West 57th Street, raised 1.05 billion shekels ($270 million) from the sale in June. It was the largest foreign debt sale this year. Total demand for the notes reached 1.7 billion shekels, it said in a statement.

Because U.S. developers and their operations are not as familiar to Israeli investors as are local real estate companies, first-time U.S. issuers pay a higher coupon over similar rated Israeli developers, said Lapidot.

‘Appetite Is There’

At least four more international companies will issue shekel bonds by the end of 2014, according to Noga Knaz, vice chairman of Rosario Capital Ltd., which helped underwrite some of the debt issuances. Debt sales by companies from the U.S., Russia and Canada are expected in the first quarter of next year, she said.

“The appetite is there,” Knaz said by phone on November 26. “But the market may be more selective going forward.”