In recent years, several U.S. states, including Alabama, have significantly increased their investment in Israeli government bonds. In April 2024, Governor Kay Ivey and Treasurer Young Boozer announced Alabama’s commitment to boost investments in Israel bonds, citing economic partnerships and shared values as driving factors. However, this decision has raised concerns due to Israel’s recent credit rating downgrades by Moody’s.
In February 2024, Moody’s downgraded Israel’s credit rating from A1 to A2, and in September 2024, further downgraded it to Baa1, citing concerns over geopolitical risks. These downgrades indicate that Israeli bonds are now considered riskier investments. As a result, state pension funds holding these bonds may face lower returns or even losses. For retirees relying on these pension funds, this could mean a reduced retirement income if the bonds underperform or if Israel’s geopolitical instability escalates further.
The ethical and fiduciary implications of these investments are also significant. Pension fund managers are legally obligated to prioritize the financial well-being of retirees by maximizing returns and minimizing risks. Investing in downgraded Israeli bonds may not align with these fiduciary duties, potentially jeopardizing retirees’ economic security. Additionally, tying pension funds to politically sensitive and volatile assets could expose pension funds to unexpected risks, further complicating the situation.
Other states have similarly invested in Israeli bonds. For instance, despite the recent downgrades, Florida, Ohio, and several municipal governments have made significant investments in Israeli bonds. Florida’s Chief Financial Officer Jimmy Patronis allocated $145 million in Israel bonds, and Ohio Treasurer Robert Sprague announced a $35 million purchase in February 2025. While consistent with long-standing policies, these investments may now be more vulnerable to the downgraded credit rating and rising geopolitical tensions.
Alabama’s decision to increase investment in Israeli bonds places its retirees at risk, as the bonds are now considered riskier investments. Moody’s recent downgrades have highlighted the financial instability of these bonds, which could lead to diminished returns for pension funds. State treasurers and pension fund managers must balance financial prudence with political considerations to ensure that investment decisions protect retirees' best interests.
Pension funds, such as Alabama’s, should prioritize stable, low-risk investments to ensure they meet their long-term obligations to retirees. U.S. Treasury bonds, municipal bonds, corporate bonds, and equity funds are among the safer alternatives to downgraded Israeli bonds. Additionally, diversifying across asset classes like real estate, precious metals, and even private equity can help balance risk and reward while maintaining a steady income stream for retirees.
Alabama Treasurer’s Office. (2024). Governor Ivey and Treasurer Boozer commit to increasing Alabama’s investment in Israel bond holdings. https://treasury.alabama.gov/govern...-alabamas-investment-in-israel-bond-holdings/
Reuters. (2024, September 27). Moody’s cuts Israel’s rating, warns of further downgrades. https://www.reuters.com/world/middle-east/moodys-cuts-israels-rating-warns-drop-junk-2024-09-27/
Truthout. (2024). U.S. state treasuries are investing hundreds of millions in Israel via bonds. https://truthout.org/articles/u-s-s...ing-hundreds-of-millions-in-israel-via-bonds/
In February 2024, Moody’s downgraded Israel’s credit rating from A1 to A2, and in September 2024, further downgraded it to Baa1, citing concerns over geopolitical risks. These downgrades indicate that Israeli bonds are now considered riskier investments. As a result, state pension funds holding these bonds may face lower returns or even losses. For retirees relying on these pension funds, this could mean a reduced retirement income if the bonds underperform or if Israel’s geopolitical instability escalates further.
The ethical and fiduciary implications of these investments are also significant. Pension fund managers are legally obligated to prioritize the financial well-being of retirees by maximizing returns and minimizing risks. Investing in downgraded Israeli bonds may not align with these fiduciary duties, potentially jeopardizing retirees’ economic security. Additionally, tying pension funds to politically sensitive and volatile assets could expose pension funds to unexpected risks, further complicating the situation.
Other states have similarly invested in Israeli bonds. For instance, despite the recent downgrades, Florida, Ohio, and several municipal governments have made significant investments in Israeli bonds. Florida’s Chief Financial Officer Jimmy Patronis allocated $145 million in Israel bonds, and Ohio Treasurer Robert Sprague announced a $35 million purchase in February 2025. While consistent with long-standing policies, these investments may now be more vulnerable to the downgraded credit rating and rising geopolitical tensions.
Alabama’s decision to increase investment in Israeli bonds places its retirees at risk, as the bonds are now considered riskier investments. Moody’s recent downgrades have highlighted the financial instability of these bonds, which could lead to diminished returns for pension funds. State treasurers and pension fund managers must balance financial prudence with political considerations to ensure that investment decisions protect retirees' best interests.
Pension funds, such as Alabama’s, should prioritize stable, low-risk investments to ensure they meet their long-term obligations to retirees. U.S. Treasury bonds, municipal bonds, corporate bonds, and equity funds are among the safer alternatives to downgraded Israeli bonds. Additionally, diversifying across asset classes like real estate, precious metals, and even private equity can help balance risk and reward while maintaining a steady income stream for retirees.
Alabama Treasurer’s Office. (2024). Governor Ivey and Treasurer Boozer commit to increasing Alabama’s investment in Israel bond holdings. https://treasury.alabama.gov/govern...-alabamas-investment-in-israel-bond-holdings/
Reuters. (2024, September 27). Moody’s cuts Israel’s rating, warns of further downgrades. https://www.reuters.com/world/middle-east/moodys-cuts-israels-rating-warns-drop-junk-2024-09-27/
Truthout. (2024). U.S. state treasuries are investing hundreds of millions in Israel via bonds. https://truthout.org/articles/u-s-s...ing-hundreds-of-millions-in-israel-via-bonds/
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