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Developments in the Greek government bond market - August 2009

09/09/2009 - Press Releases

Government bond prices rose and yields declined on international markets in August, with the exception of euro area short-term government bond prices that recorded a small decline. Among the major factors behind this performance was renewed investor caution in light of uncertain economic developments. Although economic and survey data released in the course of the month showed signs of stabilization of economic activity, both in the US and in the Euro-zone, uncertainty about the strength of the future economic recovery remained high while inflation is expected to remain subdued over the medium term.

 On the Greek electronic secondary securities market (HDAT), Greek government bond yields fell noticeably on long-term maturity bonds, while the 3-year benchmark bond yield recorded a slight increase. The 15- and the 30-year benchmark bond yields declined by respectively 15 and 11 basis points (bps) to 4.89% and 5.23% at the end of August. The 10-year yield fell by 9 bps to 4.49%, while the 3-year yield rose by only 2 bps to 2.46%. As a result, the yield curve flattened further, with the difference between the 30- and the 3-year bond yields narrowing to 276 bps from 289 bps at the end of July. In addition, the average monthly spread between the Greek and the German 10-year bond yields narrowed further significantly in August to 118 bps from 151 bps in July.

As for benchmark bond prices, they rose significantly on long-term maturity bonds, with the 30-year bond price recording the highest gain to 90.45 at the end of August from 88.94 at the end of July. The 15- and the 10-year bond prices rose to 98.06 and 111.78 respectively on August 31 from 96.59 and 111.11 on July 31. Finally, the 3-year bond price declined slightly to 104.47 from 104.66 respectively.

Trading volume on HDAT in August amounted to EUR 30.76 billion worth of transactions, compared with EUR 18.19 billion in July and EUR 25.08 billion in August 2008. The daily average turnover was EUR 1.46 billion, compared with EUR 791 million during the previous month. Investor interest was mainly focused on bonds with maturity between 7 and 10 years, which absorbed EUR 22.5 billion worth of transactions, or 73% of the overall traded volume. The most actively traded bonds were the 10-year and the 5-year benchmarks, with respectively EUR 21.9 billion and EUR 1.8 billion worth of transactions. Of the 5,901 orders executed on HDAT, 52.8% were “buy” orders and 47.2% “sell” orders.

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