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Developments in the Greek government bond market - June 2005

07/07/2005 - Press Releases

Government bonds continued to trade higher in June on international markets with yields falling further to new historic lows. The Greek 10-year bond yield declined to 3.34% and the respective German Bund yield fell below 3.10% for the first time on records on 27/6/2005. The ongoing positive performance of fixed-income securities followed the release of relatively weak economic data during the month, particularly in the Euro-zone. Moreover, oil prices rose above USD60 per barrel in June, (NYMEX crude oil futures) raising concerns about future global economic growth. Finally, investors' sentiment was further boosted by the "aggressive" (50 basis points) monetary policy easing by the Swedish Riksbank and the news that at the June Bank of England Monetary Policy Committee meeting two out of nine members voted for a rate cut. On the contrary, investors showed negligible reaction to the expected FED ninth consecutive 25 basis points (bps) increase in interest rates on June 30.

In the Greek electronic secondary securities market (HDAT) government bond yields fell considerably, particularly at the short end of the curve. The 3-year benchmark bond yield declined by 20 bps to 2.29% at the end of June from 2.49% at the end of May, the 10-year yield by 15 bps to 3.40% from 3.55% respectively and the 32-year bond yield fell by 16 bps to 4.02% on June 30 compared to 4.18% a month earlier. Consequently, the yield curve steepened as the 3 to 32-year yield gap widened to 173 bps in June compared to 169 bps in May. Finally, the average monthly yield spread between the Greek and the German 10-year benchmark bond yields remained unchanged at 25 bps as in May.

Benchmark bond prices in HDAT during June recorded significant increases between 54 bps at the short end of the curve and 295 bps at the long end. The 32-year bond price climbed to 108.48 at the end of June from 105.53 on May 31 while the 3-year bond closed at 101.71 from 101.17 respectively. The 10-year benchmark bond price recorded gains of 129 bps trading at 102.51 on June 30 compared to 101.22 at the end of May.

Trading volume on HDAT rose in June to EUR 61.61 billion worth of transactions from EUR 45.26 billion in May and compared to EUR 80.48 billion in June 2004. The daily average turnover increased to EUR 2.9 billion in June compared to EUR 2.2 billion in May. Investors' interest remained focussed on the long end of the curve and in particular on bonds with remaining maturity between 7 and 15 years, which absorbed EUR 40.60 billion or 66% of the overall traded volume. The most actively traded bond was the 10-year benchmark that recorded EUR 15.28 billion worth of transactions, followed by the 10-year bond maturing on 20/5/2014 with EUR 9.08 billion. Of the 10,961 orders executed on HDAT 51% were "buy" orders and 49% "sell" orders.

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