Developments in the Greek government bond market - August 2006
07/09/2006 - Press Releases
On international markets, government bonds continued to trade
higher for the second month in a row in August, with a significant decline in
bond yields particularly in the US. The US 10-year bond yield fell 26 basis
points (bps) and the Euro-zone equivalent bond yields around 15 bps. This
positive performance was mainly the consequence of further evidence that
economic growth was moderating in the US. In addition, the Federal Reserve kept
interest rates unchanged on August 8, after 17 consecutive increases during the
past two years. In the Euro-zone, the European Central Bank (ECB) increased
interest rates further by 25 basis points on August 3. Considerable gains were
recorded by long-term maturity bonds while on the short end of the curve, gains
were more contained because the economic data released during the month
continued to show robust growth and still high inflation risks reinforcing
investors’ expectations of further monetary policy tightening in the near future.
On the Greek electronic secondary securities market (HDAT),
benchmark bond yields fell, particularly on long-term maturities, in line with
developments in the rest of the Euro-zone markets. The 10 and the 30-year bond
yields fell respectively by 14 and 17 bps to 4.11% and 4.49% at the end of
August from 4.25% and 4.66% at the end of July, while the 3-year bond yield
declined by 8 bps to 3.65% from 3.73%. As a consequence, the yield curve
flattened while shifting downwards as the 3 to 30-year yield gap narrowed to 83
bps at the end of August from 93 bps at the end of July. In addition, the
average monthly spread between the Greek and the German 10-year benchmark bond
yields remained unchanged at 31 bps as in July.
Benchmark bond prices rose again considerably in August
between 22 and 275 bps. The strongest gains were recorded by the 30-year bond
price that closed at 100.18 on August 31 from 97.43 on July 31, the 10-year bond
price rose to 95.89 from 94.75 and the 3-year bond price to 99.30 from 99.08.
Trading volume on HDAT in August was EUR 42.98 billion worth
of transactions compared to EUR 47.12 billion in July and to EUR 55.56 billion
in August 2005. The daily average turnover was EUR 1.95 billion compared to EUR
2.24 billion in July. Trading activity was mainly focused on bonds with
remaining maturity between 7 and 10 years, which absorbed EUR 29.6 billion worth
of transactions, or 69% of the overall traded volume. The most actively traded
bond was the 10-year benchmark with EUR 19.6 billion worth of transactions
followed by the 10-year bond, maturing on 20/7/2015, with EUR 6.5 billion. Of
the 7,618 orders executed on HDAT, 48.08% were ''buy'' orders and 51.92% ''sell''
orders.