Greek government bonds outperform European markets in April - May 2001
06/06/2001 - Press Releases
The negative sentiment permeating international bond markets during
April and May 2001 spilt over the Greek market. The unfavourable backdrop was reflected at
the level of both transactions and prices. During April and May, 4012 buy orders
(amounting to Euro 20.29 bn or GRD 6,914 bn) and 5129 sell orders (amounting to Euro 25.80
bn or GRD 8,791 bn) were executed in the electronic secondary securities market (HDAT).
The monthly average turnover reached Euro 23.04 bn (GRD 7,852 bn). Meanwhile, the 10-year
benchmark bond price (maturing 18 May 2011) stood at 97.94 (yielding 5.63%) at the end of
May 2001 from 98.61 (5.53%) at the beginning of the same month and 100.68 (5.26%) at the
beginning of April 2001.
Despite the negative price performance, losses in the Greek market were
considerably lower than in the other European bond markets, a fact that was also reflected
in the narrower spread between Greek and German bond yields. In May 2001 the average
10-year spread over Bund slid to record low levels. At the end of May it stood at 45 bps
compared to 51 bps at the beginning of the same month and 57 bps in April.
This significant decline in yield spreads underscores the confidence of
investors (Greek and foreign) in the Greek government securities market and the efficiency
of the electronic trading system (HDAT) established by the Bank of Greece. Remarkably, the
spread between the Greek and the German 10-year benchmark bond yields from 86 bps in May
2000 dropped to 45 bps during the same month this year. The downward movement of the yield
curve has resulted in significant savings in the funding cost of the Hellenic Republic on
a year-on-year basis.
The development of the Greek market enabled the introduction of
different maximum bid/ask spreads in HDAT between 7 to 15 ticks, depending on the maturity
bucket of the traded securities (7 ticks for bonds maturing within 5 years, 10 ticks for
maturities between 5 and 11 years, and 15 ticks for maturities over 11 years), in line
with the practice prevailing in other European markets.