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Investors seek safe haven in the Greek government bond market

04/10/2001 - Press Releases

Ιn September international bond markets were affected by uncertainties in the wake of the terrorist attacks on the US. Concerns about the scale of the impact in the world economy triggered a shift of funds from stocks to the safe haven of government bond markets in developed countries.

In the Greek electronic market (HDAT) the upward trend in the longer-term bond prices during the first days of September was reversed after the tragedy. However, the market has already started to gradually recover the losses. Longer-term (over 10 years) bond prices declined between 21 (15y) and 82 price bps (20y). On the contrary, short to medium-term bond prices recorded significant gains in the range of 56 to 83 price bps. The 10-year benchmark bond remained steady, closing at 100.80 (yielding 5.24%) on Sept. 28 from 100.79 (yielding 5.24%) on Aug. 31.

The average yield spread of the 3y against 20y bond (maturing on 11.2.2003 and 22.10.2019 respectively) widened to 210 bps in September from 165 bps in the previous month and against the 10y benchmark bond (maturing 18.5.2011) to 153 bps from 116 bps.

The spread over the Bund before September 11th was around 45 bps, while it exceeded 50 bps immediately after, as investors moved to the core European bond markets, mainly Germany. On an average monthly basis, however, the spread narrowed from 49 bps in August to 48 bps in September, and stood at 45 bps on Oct. 3.

Turnover in HDAT rose considerably to EUR 26,311 million in September from EUR 22,917 million in the previous month. The uncertainty caused by the terrorist attacks contributed to investors’ shifting to the shorter end of the yield curve. The yield of the 5y bond maturing on 24.3.2005 (effective maturity 3½ years) declined to 4.10% on Sept. 28 from 4.34% prior to the attack. Moreover, the turnover of short-term bonds in September rose to 59.34% of the total from 53.36% on average Jan.-Aug. 2001.

Government bond market prospects remain positive in the near future. Weaker global growth and lower international fuel prices from the previous high levels create expectations for lower inflation and further easing of monetary policy. In the aftermath of the atrocious acts, all the major central banks cut official interest rates (the European Central Bank by 50 bps and the Federal Reserve by 100 bps).

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