BoI warns of the fiscal trilemma. Central bank deploys $1.02B in FX. Cando Drones completes ₪19M IPO.
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Quick takes:
Macro & Policy: Bank of Israel Governor Amir Yaron warns of a looming fiscal trilemma following a 25-basis-point rate cut, as the central bank simultaneously deploys $1.02B in foreign exchange purchases to stabilize the shekel.
Aerospace & Defense: Retail magnate Rami Levy-backed Cando Drones raises ₪19M in a TASE public offering; RP Optical Lab secures a $2.1M European thermal lens contract to capitalize on the continent's rearmament cycle.
Macro & Policy
Bank of Israel Governor Prof. Amir Yaron outlined the macroeconomic rationale behind the recent 0.25% interest rate reduction to 3.5%, citing localized inflation stabilizing at 1.9% YoY and a significant drop in the national risk premium. Yaron highlighted that the US-Iran memorandum of understanding has temporarily eased geopolitical tensions and suppressed global energy prices, providing the central bank with a window for monetary easing. Furthermore, Q2 2026 saw a robust $4B in high-tech capital raises. The BoI’s Research Department forecasts 4.0% GDP growth for 2026 and 5.5% in 2027, assuming no major escalation. However, Yaron explicitly warned the government of a looming “fiscal trilemma”—the friction between funding expanding defense requirements, investing in civilian growth engines, and returning the debt-to-GDP ratio to a descending path.
In a parallel move highlighting the BoI’s active market management, the central bank reported purchasing $1.027B in foreign currency during June 2026 to support market liquidity. Israel’s total foreign exchange reserves now stand at an imposing $238.69B, representing 37.2% of GDP. The modest $18M net monthly increase occurred because the $1.02B in BoI purchases and $625M in government FX activity were heavily offset by a $1.45B negative revaluation of the portfolio’s asset value.
Our take: Bank of Israel Governor Prof. Amir Yaron outlined the macroeconomic rationale behind the recent 0.25% interest rate reduction to 3.5%, citing localized inflation stabilizing at 1.9% YoY and a significant drop in the national risk premium. Yaron highlighted that the US-Iran memorandum of understanding has temporarily eased geopolitical tensions and suppressed global energy prices, providing the central bank with a window for monetary easing. Furthermore, Q2 2026 saw a robust $4B in high-tech capital raises. The BoI’s Research Department forecasts 4.0% GDP growth for 2026 and 5.5% in 2027, assuming no major escalation. However, Yaron explicitly warned the government of a looming ‘fiscal trilemma’, the friction between funding expanding defense requirements, investing in civilian growth engines, and returning the debt-to-GDP ratio to a descending path.
In a parallel move highlighting the BoI’s active market management, the central bank reported purchasing $1.027B in foreign currency during June 2026 to support market liquidity. Israel’s total foreign exchange reserves now stand at an imposing $238.69B, representing 37.2% of GDP. The modest $18M net monthly increase occurred because the $1.02B in BoI purchases and $625M in government FX activity were heavily offset by a $1.45B negative revaluation of the portfolio’s asset value.
Aerospace & Defense
Cando Drones, a provider of autonomous end-to-end aerial drone systems, has successfully completed its Initial Public Offering (IPO) on the Tel Aviv Stock Exchange, raising ₪19M at a post-money valuation of ₪90M (excluding options). The structural offering included units comprising 100 shares and 50 options at ₪4.64 per unit, with the potential to inject an additional ₪14.2M if strike prices are met by July 2028. Led by former IDF generals, including CEO Brig. Gen. (Res.) Yoeli Or, the company operates a ‘Full-Service’ model managing aviation regulation, airspace integration, and logistics. Notably, supermarket magnate Rami Levy serves as the company’s largest shareholder, holding a 22.3% post-IPO stake.
Simultaneously showcasing the export power of Israeli defense tech, TASE-listed RP Optical Lab reported its first major strategic contract with a new European defense client. The $2.1M agreement, primarily slated for execution in 2027, involves the development and supply of advanced thermal lenses. The market reacted positively, pushing RP Optical shares up by 1.12%, as management views this as a vital foothold into the highly lucrative European rearmament supply chain.
Our take: We are witnessing a fascinating structural shift in how Israeli defense and dual-use technologies are capitalized. Cando Drones bypasses the traditional, often sluggish VC funding bottleneck by tapping directly into public retail and institutional liquidity on the TASE. Rami Levy’s heavy equity stake represents a unique capital arbitrage: bridging consumer-grade logistics infrastructure with military-grade autonomous flight. This full-service model, managing the regulatory friction and airspace management rather than just selling hardware, creates a sticky, high-yield recurring revenue loop.
On the pure defense side, RP Optical’s European breakthrough highlights the macro-tailwind benefiting the Israeli aerospace oligopoly. As NATO and European OECD peers aggressively hike defense budgets to counter eastern threats, they require battle-tested, off-the-shelf electro-optics. Israeli mid-cap defense firms are perfectly positioned to capture this alpha. The initial $2.1M is a classic land-and-expand strategy; securing the vendor master agreement clears the institutional resistance for future, much larger procurement cycles.
TASE snapshot for Wednesday, July 08, 2026
TA-35 Index (TASE:TA35) 🟢 +0.03%
TA-90 (TASE:TA90): 🔴 -1.02%
TA-125 (TASE:TA125): 🔴 -0.25%
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Disclaimer: This brief is for informational purposes only and does not constitute investment advice. All data current as of publication date.