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Developments in the Greek government bond market - November 2005

05/12/2005 - Press Releases

On international markets government bond performance was mixed in November. In the US, after two months of correction and despite a further increase in official interest rates by the Federal Reserve on November 1, government bond yields declined at the long end of the yield curve while they remained virtually unchanged at the short end. This performance followed the release of benign (October) inflation data. In addition, the minutes of the FOMC November meeting published towards the end of the month revived market expectations that the Federal Reserve might be near the end of its tightening cycle. On the contrary, in the Euro-zone government bond yields rose, particularly at the short end of the curve, as fears of monetary tightening mounted during November.

In the Greek electronic secondary securities market (HDAT) government bond yields rose, in line with the rest of the Euro-zone markets. The increase in yields was more pronounced at the short-end of the curve, with the 3-year yield rising by 14 basis points (bps) whereas the 32-year yield increased by only 3 bps. As a result, the yield curve flattened further in November (bearish flattening) while moving upwards, with the 3 to 32-year yield gap narrowing to 118 bps from 130 bps in October. The 10-year benchmark bond yield rose to 3.63% at the end of November from 3.59% at the end of the previous month. The average monthly yield spread between the Greek and the German 10-year benchmark bond yields was 20 bps as in October.

Benchmark bond prices fell in the range of 33-66 bps. The largest loss was recorded by the 7-year bond and the smallest by the 10-year bond. They closed at 110.85 and 100.48 respectively at the end of November compared to 111.51 and 100.81 on October 31. The 3-year bond price fell to 99.88 on November 30 compared to 100.23 at the end of October and the 32-year bond price to 106.56 from 107.05 respectively.

Trading volume on HDAT in November was EUR 74.68 billion worth of transactions compared to EUR 76.44 billion in October, while the daily average turnover was EUR 3.39 billion compared to EUR 3.82 billion in the previous month. Bonds with remaining maturity between 7 and 10 years absorbed EUR 47.52 billion or 64% of the overall traded volume. The most actively traded bond was the 10-year benchmark that recorded EUR 29.04 billion worth of transactions followed by the 15-year bond maturing on 11/1/2014 with EUR 8.10 billion. Of the 13,387 orders executed on HDAT 50.1% were "buy" orders and 49.9% "sell" orders.

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