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Developments in the Greek government bond market - November 2003

08/12/2003 - Press Releases

Government bonds traded lower on international markets during November as economic data continued to provide evidence of a strengthening in global growth suggesting higher yields in the future. Renewed fears for global security had only a limited positive impact on bond price performance. In the Euro-zone, bond markets losses were contained by the strength of the Euro, associated to increased demand for Euro-denominated assets. The Euro rose to new historic highs in November, above 1.20 against the USD for the first time since it was launched.

Greek government bonds trading on the electronic secondary securities market (HDAT) recorded losses in line with their European equivalents. The decline in prices was more pronounced for bonds with remaining maturity above 6 years. More in details, amongst the benchmark bonds traded in HDAT the 10-year bond (maturing on 20/5/2013) closed at 100.33 (with a yield of 4.55%) at the end of November from 101.05 (4.45%) on October 31, recording losses of 72 price basis points (bps), while both the 7 and the 20-year benchmarks (maturing on 19/5/2010 and 22/10/2022 respectively) lost 69 bps during November. On the short-end of the curve price losses were not as significant because investors expect official ECB interest rates to remain unchanged at historic lows in the coming months. The 3-year bond (maturing on 21/6/2006) closed at 99.09 (3.12%) at the end of November compared to 99.25 (3.04%) on October 31. The average monthly yield spread between the 10-year Greek and German benchmark bond narrowed to the historic low level of 11 basis points (bps) in November from 13 bps in the previous month.

The yield curve shifted upwards while showing a marginal flattening as the 3 to 20-year bond yield spread narrowed to 200 bps at the end of November from 202 bps at the end of October. At the same time, the "belly" of the curve underperformed the "wings" since medium-term bond yields (5 to 10 years remaining maturity) rose more (10 bps) than 3 and 20-year bond yields (7.5 bps and 5 bps respectively).

Market turnover on HDAT remained at historically high levels in November, EUR 70.07 billion, after the peak of EUR 79.72 billion reached in October and compared to EUR 46.89 billion in November 2002. As in October, more than half of this volume (56%) was concentrated on bonds with remaining maturity between 7 and 10 years that absorbed EUR 39.12 billion. Amongst individual bonds traded on HDAT, the 10-year benchmark recorded the highest traded volume with EUR 19.5 billion. Its liquidity, as measured by the ratio of the monthly traded volume over the amount outstanding, declined to 287% from 341% in October. Of the 11,806 orders executed in HDAT during November, 50.15% were "sell" orders and 49.85% "buy" orders.

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