JERUSALEM, July 16 (Reuters) - Mizrahi Tefahot

, Israel's third-largest bank, said on Wednesday it

raised 4.5 billion shekels ($1.3 billion) in a bond offering to

institutional investors.

The bank initially had planned on raising 2.3 billion

shekels in debt through three instruments - a new commercial

paper series, an expansion of a shekel-denominated series and an

expansion of an inflation-linked subordinated notes series.

It noted that when demand had reached 5.9 billion shekels,

it opted to increase the amount raised.

Shekel bonds will pay 0.4 percentage points over comparable

Israeli government bonds, while the spread for inflation-linked

debt will be 0.95 percentage points. The spread for its

commercial paper is negligible over the Bank of Israel rate.

"The strong interest from institutional investors reflects

the high level of trust the bank enjoys in the capital markets,

as well as its broad access to relatively cheap and readily

available funding sources for its various needs," said CEO Moshe

Lari.

($1 = 3.3575 shekels)

(Reporting by Steven Scheer; Editing by Emelia

Sithole-Matarise)