Developments in the Greek government bond market - January 2008
12/02/2008 - Press Releases
On international markets, government bonds recorded
considerable gains and yield curves steepened significantly in January in response
to the release of weak economic data in the US and the strong monetary policy
easing by the Federal Reserve. The data published in the US showed deteriorating
consumer, industrial and labour market conditions together with a worsening of
the housing contraction. At the same time tensions in financial markets
intensified and global equity markets fell dramatically as investor fears of a
US economic recession increased. In view of a weakening of the US economic
outlook and downside risks to growth the Federal Reserve cut official interest
rates twice during January, by 75 basis points (bps) in an emergency move on
January 22 and by further 50 bps at the end of the regular meeting on January
29-30. In the Euro-zone economic data as well as confidence indicators published
during the month showed further weakening.
On the Greek electronic secondary securities market (HDAT),
government bond yields fell in January along the whole maturity spectrum and
more remarkably on the short end of the curve, in line with the performance seen
in the rest of the Euro-zone markets. On January 29, a new 3-year benchmark bond
(maturity 20/3/2011) was introduced into HDAT and its yield was trading at 3.77%
on the last day of the month. The old 3-year benchmark bond yield fell by 52 bps
to 3.70% on January 28 from 4.22% on December 31. On the long end of the curve,
the 10-year benchmark bond yield declined by 32 bps to 4.34% at the end of
January from 4.66% on December 31 and the 30-year bond yield fell by 10 bps (considering
rounding) to 4.96% from 5.05%. As a result, the yield curve steepened
considerably with the yield difference between the 30 and the new 3-year bond
yields reaching 119 bps at the end of January compared to 84 bps at the end of
December. Finally, the average monthly spread between the Greek and the German
10-year benchmark bond yields widened to 35 bps in January from 29 bps in
December.
Benchmark bond prices rose between 75 and 242 bps, with the
10-year bond price showing the biggest increase to 99.64 on January 31 from
97.22 on December 31. The new 3-year bond was trading at 100.09 on January 31
while the 30-year bond at 94.2 compared to 92.7 on December 31.
Trading volume on HDAT in January amounted to EUR 43.73
billion worth of transactions compared to EUR 21.36 billion in December and EUR
64.31 in January 2007. The daily average turnover was EUR 1.99 billion compared
to EUR 1.12 billion during the previous month. Investors' interest was mainly
focused on bonds with remaining maturity between 7 and 10 years, which absorbed
EUR 21.5 billion worth of transactions, or 49% of the overall traded volume,
while the most actively traded bond was the 10-year benchmark with EUR 13.24
billion worth of transactions followed by the 10-year bond, maturing on
20/7/2016, with EUR 5.05 billion. Of the 7,898 orders executed on HDAT, 46% were
''buy'' orders and 54% ''sell'' orders.