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Developments in the Greek government bond market - September 2005

05/10/2005 - Press Releases

Οn international markets government bonds performance was mixed during September. In the US, government bond yields increased despite the damage caused by the hurricanes (that hit the country in August and September). This move reflected investors' view that after a negative short-term impact on the economy reconstruction efforts would boost growth in the medium term. Moreover, fears of an oil-related acceleration of inflation represented a further negative factor for government bonds. Finally, the FED increased official interest rates by 25 basis points (bps) to 3.75% on September 20. In the Euro-zone, government bond yields reached new historic lows in the aftermath of the German elections and on worries related to hurricane Rita but then increased during the last week of the month following the release of encouraging economic data. This correction took short-term yields to higher levels than at the end of August, while long-term yields closed the month almost unchanged.

In the Greek electronic secondary securities market (HDAT) government bonds performance was in line with the rest of the Euro-zone markets. Bond yields declined to new historic lows during the first three weeks of September (with the exception of the 3-year yield), with the 10-year benchmark bond yield falling for the first time on record to 3.21% on September 22. During the remaining part of the month, yields rose particularly at short to medium-term maturities with the result of a significant flattening of the curve. More in details, at the end of September the 3-year yield closed at 2.54% from 2.45% a month earlier, the 10-year yield at 3.35% from 3.36% and the 32-year yield at 3.90% from 3.96% respectively, after having touched a low of 3.81% on September 22. Therefore, the yield curve flattened further, with the 3 to 32-year yield gap narrowing to 135 bps compared 152 bps in August and 163 bps in July. Finally, the average monthly yield spread between the Greek and the German 10-year benchmark bond yields remained steady at 21 bps as in August.

Short to medium-term benchmark bond prices recorded small losses of around 30 bps during September, while bonds with remaining maturity between 10 and 32-years recorded gains in the range of 6 to 130 bps. The 3-year bond price closed at 100.90 on September 30 from 101.19 on August 31 while the 10-year and the 32-year bond prices rose to 102.87 from 102.81 and to 110.85 from 109.55 respectively.

The trading volume on HDAT rose to EUR 78.73 billion worth of transactions in September compared to EUR 55.56 billion in August. The daily average turnover rose to EUR 3.58 billion compared to EUR 2.53 billion in August. Investors' interest focused once again on bonds with remaining maturity between 7 and 10 years, which absorbed EUR 45.36 billion or 58% of the overall traded volume. The 10-year benchmark bond recorded EUR 22.79 billion worth of transactions and the 10-year bond maturing on 20/5/2014 EUR 10.82 billion. Of the 13,907 orders executed on HDAT 51.5% were "buy" orders and 48.5% "sell" orders.

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