Developments in the Greek government bond market - June 2004
08/07/2004 - Press Releases
Government bonds recorded further small losses during June on
international markets, mainly at the short end of the yield curve. This was due
to investors' expectations of a monetary policy tightening in the US on the back
of strong economic data released during the month. Indeed, the FED raised
interest rates by 25 bps on June 30. At the same time, the gradual economic
recovery in the Euro-zone continued and inflation picked up fuelled by higher
oil prices, contributing to the general downbeat market sentiment.
In the Greek electronic secondary securities market (HDAT)
government bond prices fell for all maturities with the exception of the 20-year
benchmark bond (maturing on 22/10/2022) that posted a small gain of 7 price
basis points. 5 and 7-year benchmark bonds recorded the highest losses, of 51
and 58 bps respectively, while the price of both the 3 and the 10-year
benchmarks fell 37 bps. More in details, the 10-year benchmark bond (maturing on
20/5/2014) was trading at 99.63, with a yield of 4.54%, on June 30 from 100.00
(4.49%) at the end of May. The average monthly yield spread between the latter
and its German counterpart narrowed to 18 bps in June from 22 bps in May, a
change that was almost entirely due to the change of the 10-year benchmark in
Germany (the latter has maturity date 4/7/2014, hence one and a half months
later than the Greek 10-year benchmark).
The yield curve became considerably flatter during June, as
yields at the short end of the curve (3-year) rose around 13 bps while at the
long end (20-year) they fell 1 bps, in line with investors' expectations of
higher interest rates in the near future. The 3 to 20-year yield gap therefore
declined to 182 bps at the end of June from 195 a month earlier.
Market turnover on HDAT recorded a new historic high in June
of EUR 80.48 billion (the previous high was recorded in October 2003 with EUR
79.72 billion) after EUR 61.83 billion in May and compared to EUR 61.94 billion
in June 2003, with an annual increase of 30%. The most actively traded bonds on
HDAT were those with remaining maturity between 7 and 10 years, which absorbed
59% of the overall volume. Amongst individual bonds, the 10-year benchmark
recorded the highest traded volume for the fourth month in a row, with EUR 31,14
billion worth of transactions, followed by the 10-year bond maturing on
20/5/2013 with EUR 6.79 billion. Of the 14,293 orders executed in HDAT during
June 51.87% were "buy" orders and 48.13% "sell" orders.