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Developments in the Greek government bond market - June 2009

03/07/2009 - Press Releases

Government bond prices rose and yields fell in June in the Euro-zone markets, particularly at the long end of the yield curve, while losses were recorded in the US bond market, especially on short-term maturity bonds, with the exception of the 30-year bond whose yield remained virtually unchanged. Among the major factors leading to this performance was, on the one hand, a very large amount of debt issuance in the US that led to increased investor concern about the US fiscal position. On the other hand, despite some improvement in confidence indicators, macroeconomic data released in the Euro-zone showed that there is still uncertainty about the timing and the strength of economic recovery, thereby enhancing investor expectations that European Central Bank official interest rates will remain at historically low levels for a sustained period of time.

On the Greek electronic secondary securities market (HDAT), Greek government bond yields fell, in line with the performance seen in the rest of the Euro-zone markets. Specifically, the biggest decline was recorded by the 5-year benchmark bond yield that plunged by 54 basis points (bps) to 3.69% at the end of June from 4.23% at the end of May. The 3-year benchmark bond yield fell by 39 bps (including rounding) to 2.69% at the end of June from 3.09% at the end of May, while at the long end of the yield curve, the 10-year benchmark bond yield declined by 42 bps to 5.05% and the 30-year yield by 8 bps to 5.79% at the end of June from 5.47% and 5.87% respectively at the end of May. As a result, the yield curve was steeper at the end of June, with the yield difference between the 30 and the 3-year bond yields widening to 309 bps from 278 bps a month earlier. In addition, the average monthly spread between the Greek and the German 10-year bond yields remained unchanged at 179 bps as in May.

 Benchmark bond prices rose significantly, with the 10-year bond price recording the highest gain to 107.24 at the end of June compared to 103.97 at the end of May. In addition, the 3-year bond price rose to 104.14 on June 30 from 103.20 on May 29, the 5-year bond price to 108.21 from 105.72 and the 30-year bond to 83.01 from 82.01.

Trading volume on HDAT in June increased to EUR 27.77 billion worth of transactions compared to EUR 20.22 billion in May and EUR 26.69 billion in June 2008. The daily average turnover was EUR 1.32 billion compared to EUR 1.01 billion during the previous month. Investor interest was mainly focused on bonds with remaining maturity between 10 and 15 years, which absorbed EUR 14.5 billion worth of transactions, or 52% of the overall traded volume. The most actively traded bonds were the 10-year and the 5-year benchmarks with respectively EUR 13.8 billion and EUR 3.9 billion worth of transactions. Of the 5,105 orders executed on HDAT, 55.7% were “buy” orders and 44.3% “sell” orders.

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