Developments in the Greek government bond market - September 2006
05/10/2006 - Press Releases
International government bond markets had a positive
performance in September for the third consecutive month. In the US government
bond yields fell along the whole maturity spectrum, whereas in the Euro-zone
government bond yields declined significantly at the long end of the curve while
short term bond yields remained approximately at the same levels reached at the
end of August. The reason for this performance was investors' expectations of
further interest rates increases by the European Central Bank (ECB) on the one
hand, and macroeconomic developments in the US on the other. The repeated
statements of the ECB President about the need of strong vigilance on price
developments was the main factor that led investors to expect further increases
in official interest rates by the ECB in the near future therefore limiting the
possibility of a decline in short term European bond yields. On the other hand,
the economic data released in the US reinforced investors' expectations of a
significant deceleration of the US economy and of lower official interest rates
in coming months leading to a decline in government bond yields.
On the Greek electronic secondary securities market (HDAT),
benchmark bond yields declined significantly on the long end of the curve while
3 - year bond yields remained virtually unchanged. The 10 and the 30 - year bond
yields fell respectively by 14 and 24 basis points (bps) to 3.97% and 4.25% at
the end of September from 4.11% and 4.49% a month earlier, while the 3-year bond
yield was 3.66% (3.657%) at the end of September compared to 3.65% (3,654%) at
the end of August. As a consequence, the yield curve flattened significantly
while shifting downwards as the 3 to 30-year yield gap narrowed to 60 bps at the
end of September from 83 bps at the end of August. In addition, the average
monthly spread between the Greek and the German 10 - year benchmark bond yields
narrowed to 30 bps in September compared to 31 bps during the previous two
months.
Benchmark bond prices rose between 1 and 403 bps in September.
The strongest gains were recorded by the 30-year bond price that closed at
104.21 on September 29 from 100.18 on August 31 while the 10-year bond price
rose to 97.00 from 95.89 and the 3-year bond price was almost unchanged at 99.31
from 99.30.
Trading volume on HDAT was EUR 52.45 billion worth of
transactions in September compared to EUR 42.98 billion in August and to EUR
78.73 billion in September 2005. The daily average turnover rose to EUR 2.50
billion from EUR 1.95 billion in August. Trading activity was mainly focused on
bonds with remaining maturity between 7 and 10 years, which absorbed EUR 34.81
billion worth of transactions, or 66% of the overall traded volume. The most
actively traded bond was the 10-year benchmark with EUR 23.96 billion worth of
transactions followed by the 10-year bond, maturing on 20/7/2015, with EUR 7.90
billion. Of the 9,316 orders executed on HDAT, 49.69% were ''buy'' orders and
50.31% ''sell'' orders.