Developments in the Greek government bond market - August 2008
08/09/2008 - Press Releases
Government bonds had a positive performance on international
markets in August, with yields recording a significant decline, particularly on
short-term Euro-zone bonds. This followed the release of data showing a
substantial deterioration in economic activity as well as in consumer and
business confidence in the Euro-zone, along with ongoing economic weakness in
the US. In addition, oil prices declined sharply in light of the worsening
global growth outlook and investor worries about inflation receded with positive
effects for government bonds. Finally, at the beginning of August both the
Federal Reserve and the European Central Bank left official interest rates on
hold.
On the Greek electronic secondary securities market (HDAT),
government bond yields fell in August, particularly on short-term maturities, in
line with the performance seen in the rest of the Euro-zone. The 3-year
benchmark bond yield fell by 26 basis points (bps) to 4.55% on August 29 from
4.81% on July 31, while on the long end of the curve, 10-year and 30-year
benchmark bond yields fell respectively by 23 bps and 15 bps to 4.84% and 5.18%
at the end of August from 5.07% and 5.33% a month earlier. As a result, the
yield curve became steeper while shifting downwards, with the yield difference
between the 30 and the 3-year bond yields widening to 63 bps from 52 bps at the
end of July. In addition, the average monthly spread between the Greek and the
German 10-year bond yields widened further slightly to 66 bps in August from 64
bps in July.
Benchmark bond prices rose between 68 and 216 bps, with the
30-year bond price showing the biggest increase to 90.98 on August 29 from 88.82
on July 31. In addition, the 3-year bond price rose to 98.19 at the end of
August from 97.51 a month earlier and the 10-year bond price to 98.13 from
96.36.
Trading volume on HDAT in August amounted to EUR 25.08
billion worth of transactions compared to EUR 29.17 billion in July and to EUR
28.43 billion in August 2007. The daily average turnover was EUR 1.25 billion
compared to EUR 1.27 billion during the previous month. Investor interest was
mainly focused on bonds with remaining maturity between 7 and 10 years, which
absorbed EUR 19.2 billion worth of transactions, or 77% of the overall traded
volume, while the most actively traded bond was the 10-year benchmark with EUR
17.2 billion worth of transactions followed by the 10-year bond, maturing on
20/7/2017 with EUR 1.6 billion. Of the 4,875 orders executed on HDAT, 50.6% were
"buy" orders and 49.4% "sell" orders.