Emerging Insight: More room for ILS weakness

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Emerging Insight: More room for ILS weakness

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Emerging Insight

More room for ILS weakness

Key takeaways 28 June 2026

GEM Fixed Income Strategy &• Lower S&P500, EM FX weakness and ILS overvaluation should drive USDILS higher.

Economics The strong current account position is a risk.

Global

• S&P500 remains the main driver of USDILS due to local hedging, but ILS's beta to

S&P has low correlation with hedging ratios Mikhail Liluashvili

EEMEA Local Markets Strategist

• BoI is likely to intervene if USDILS reaches 2.80 as was the case in May when it MLI (UK)

+44 20 7996 1142

bought c. USD801mn. mikhail.liluashvili@bofa.com

David Hauner, CFA >>

Global EM FI/FX Strategist

MLI (UK)By Mikhail Liluashvili +44 20 7996 1241

Chart of the day: USDILS is again strongly correlated with the S&P500 david.hauner@bofa.com

S&P500 and USDILS Claudio Irigoyen

Global Economist

8000 2.8 BofAS

S&P 500 USDILS (inverted, RHS) +1 646 855 1734

claudio.irigoyen@bofa.com

3.3 See Team Page for List of Analysts

5000 For a list of open trade 3.8

recommendations and trade

4000 recommendations closed in the last

4.3 12 months, see Global Emerging 3000

Markets Weekly: Oil relief meets

2000 hawkish Fed 19 June 2026

4.8

1000 Abbreviations

0 5.3

Feb-00 Feb-04 Feb-08 Feb-12 Feb-16 Feb-20 Feb-24 BoI is Bank of Israel

Source: Bloomberg, BofA Global Research

BofA GLOBAL RESEARCH

We are bearish the ILS

We are still long USDILS (current: 3.0, open: 2.99) because we expect a lower S&P500

and EM FX weakness. The shekel also looks overvalued. For the original trading idea, see

EM Alpha: Hawkish Fed means higher USDILS & USDHUF 24 June 2026. The S&P500

remains the main driver of USDILS as local investors hedge their exposure to US

equities by shorting USDILS in forwards.