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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.

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