Developments in the Greek government bond market - June 2006
10/07/2006 - Press Releases
On international markets, government bonds recorded losses in
June, with the exception of the 30-year US bond that remained virtually stable.
During the first half of the month the ongoing decline in international equity
markets, on the back of firmer evidence of slowing growth in the US, lent
support to government bonds. However, during the second part of June, bond
market sentiment turned negative following the release of disappointing
inflation data, particularly in the US that led investors to revise upwards
their expectations of future interest rates. As a consequence, bond yields
started rising along the entire maturity spectrum and especially at the short
end of the curve. Finally, on June 8 the European Central Bank raised interest
rates by 25 basis points (bps) to 2.75% and on June 29 the Federal Reserve
announced its 17th consecutive increase (25 bps) in interest rates to 5.25%.
On the Greek electronic secondary securities market (HDAT),
benchmark bond yields rose particularly on short to medium term maturities, in
line with developments seen in the rest of the Euro-zone markets. The 3-year
bond yield increased by 19 basis points (bps) to 3.82% at the end of June from
3.64% on May 31, while the 10 and the 30-year bond yields rose respectively by
13 and 10 bps to 4.40% from 4.28% and to 4.80% from 4,70%. As a consequence, the
yield curve flattened while shifting upwards as the 3 to 30-year yield gap
narrowed to 98 bps at the end of June from 107 bps a month earlier. Finally, the
average monthly spread between the Greek and the German 10-year benchmark bond
yields remained unchanged at 32 bps for the third consecutive month. Benchmark
bond prices declined between 50 and 148 bps. The highest losses were recorded by
the 30-year bond price that declined to 95.18 on June 30 from 96.66 at the end
of May. The 3-year bond price fell to 98.80 from 99.30 and the 10-year bond
price to 93.51 from 94.45. Trading volume on HDAT in June recorded EUR 49.72
billion worth of transactions compared to EUR 51.10 billion in May and EUR 61.61
billion in June 2005. The daily average turnover rose to EUR 2.37 billion from
EUR 2.32 billion during the previous month.
Trading activity was mainly focused on bonds with remaining
maturity between 7 and 15 years, which absorbed EUR 34 billion worth of
transactions, or 68% of the overall traded volume. The most actively traded bond
was the 10-year benchmark with EUR 22.42 billion worth of transactions followed
by the 10-year bond, maturing on 20/7/2015, with EUR 7.28 billion. Of the 8,856
orders executed on HDAT, 50.78% were "buy" orders and 49.22% "sell" orders.