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Developments in the Greek government bond market - September 2009

05/10/2009 - Press Releases

Government bond prices rose and yields declined further in the US market in September, particularly at the long end of the yield curve, while in euro area government bond markets yields remained more or less unchanged at the levels seen at the end of August. Overall, government bond prices were supported by market expectations that official interest rates will be maintained at the current very low levels in the major economies for an extended period of time. This was partly due to the data released during the month that reinforced investor view that the pace of economic recovery is likely to be very slow. In addition, inflation expectations remain subdued.

On the Greek electronic secondary securities market (HDAT), Greek government bond yields rose slightly on bonds with remaining maturity between 5 and 10 years, while 3-, 15- and the 30-year benchmark bond yields fell. The 3-year yield recorded the sharpest decline by 26 basis points (bps) to 2.20% at the end of September, while the 15- and the 30-year yields fell by 6 and 5 bps respectively to 4.83% and 5.18%. The 10-year yield rose by only 2 bps to 4.51%. Therefore, the yield curve steepened, with the difference between the 30- and the 3-year bond yields widening to 298 bps from 276 bps at the end of August. In addition, the average monthly spread between the Greek and the German 10-year bond yields widened in September to 127 bps from 118 bps in August.

As for benchmark bond prices, the 3-year bond price rose to 104.98 at the end of September from 104.47 at the end of August, the 15-year bond price to 98.69 from 98.06 and the 30-year bond price to 91.15 from 90.45 respectively. On the contrary, the 10-year bond price fell slightly to 111.52 on September 30 from 111.78 on August 31.

Trading volume on HDAT in September increased noticeably to EUR 51.79 billion worth of transactions, compared with EUR 30.76 billion in August and EUR 26.30 billion in September 2008. The daily average turnover was EUR 2.35 billion, compared with EUR 1.46 billion during the previous month. Investor interest was mainly focused on bonds with maturity between 7 and 10 years, which absorbed EUR 37.5 billion worth of transactions, or 72% of the overall traded volume. The most actively traded bonds were the 10-year and the 5-year benchmarks, with respectively EUR 36.3 billion and EUR 4.2 billion worth of transactions. Of the 9,783 orders executed on HDAT, 52.2% were “buy” orders and 47.8% “sell” orders.

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