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Developments in the Greek government bond market – August 2003

09/09/2003 - Press Releases



Sentiment remained negative on international bond markets during August while trading activity was relatively subdued because of the summer holiday period. Government bonds traded in narrow ranges and eventually closed the month with losses. The economic data released during the month provided further evidence of an improvement in the economic situation in the US and in Japan . In the Euro-zone upbeat business confidence data, particularly in Germany , seemed to suggest that there would be positive economic developments in the months to come.


In line with the performance seen in the other European markets, Greek government bonds trading on HDAT fell between 23 and 141 price basis points. The 7-year bond maturing on 19.5.2010 recorded the highest price losses closing at 111.83 (with a yield of 3.96%) on 29 August from 113.24 (3.76%) at the end of July. The 10-year benchmark bond (maturing on 20.5.2013) closed at 102.15 (4.32%) at the end of August compared to 102.95 (4.22%) a month earlier. The average 10-year yield spread over Bunds widened marginally to 14 basis points (bps) after having reached an historic low of 13 bps in July.


The yield curve flattened significantly during the month while shifting higher as yields at the short-end of the curve (3-year area) rose 28 bps compared to just 2 bps at the long-end (20-year area). The 3- to 20-year bond yield spread narrowed to 190 bps from 216 bps at the end of July. This reflected the re-adjustment of monetary policy expectations by the majority of market participants who no longer forecast interest rates cuts in the US and the Euro-zone in the near future.


Market turnover on HDAT declined in August to EUR 54.24 billion from EUR 60.34 billion in July and compared to EUR 57.23 billion in August 2002. Investors’ interest focused on bonds with remaining maturity until 10 years that attracted 83% of the total turnover. The 10-year benchmark bond was once again the most actively traded with a volume of EUR 13.97 billion and its liquidity, as measured by the ratio of the monthly traded volume over the amount outstanding, declined to 205% from 229% in July. Of the 9,786 orders executed in HDAT during August, 51.32% were 'buy" orders and 48.68% "sell" orders.


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