Developments in the Greek government bond market - November 2002
13/11/2002 - Press Releases
International bond markets had a positive performance during November,
partially recovering the losses recorded in October. At the beginning of the month, they
benefited from the 50 bps interest rates cut by the Federal Reserve. This was followed by
a series of weak economic data releases, particularly in the Euro-zone, and improving
inflationary outlook. In addition, the persistence of the geopolitical risk provided
further support to government bonds. Furthermore, the European Central Bank reduced
interest rates by 50 bps at its December 6 meeting.
On the domestic market (HDAT), bond prices rose between 8 and 119 basis
points (bps). Price gains were higher at the long end of the curve with the 15-year bond,
maturing on 11.1.2014, closing at 113.62 on November 29 from 112.84 on October 31, and the
20-year bond, maturing on 22.10.2022, closing at 107.22 from 106.03 respectively. The
price of the 10-year benchmark bond, maturing on 18.5.2012, rose to 103.69 from 103.14
gaining 55 bps. Greek bonds, along with the other peripheral government bonds,
outperformed their German equivalents. Moreover, the credit rating upgrade of the Greek
debt by Moody’s, further helped reducing the yield spreads between Greek and German
bonds. The average monthly 10-year benchmark yield spread declined to 26 bps in November
from 31 bps in October.
Bond yields fell slightly more at the very long end of the curve as
compared to the short end and this was reflected in a flatter yield curve in November with
respect to the previous month. The 3- to 20-year bond yield spread narrowed to 188 bps
from 191 bps at the end of October. The 3-year bond yield declined to 3.42% on November 29
from 3.49% on October 31 while the 20-year yield to 5.30% from 5.40% respectively.
Turnover on HDAT was EUR 46.89 billion in November compared to EUR
69.30 billion in October and to EUR 56.69 billion in November 2001. The most actively
traded bond, for the second month running, was the 10-year benchmark with EUR 7,609
million worth of transactions followed by the 5-year benchmark, maturing on 19.4.2007,
with EUR 5,089 million.
Given market expectations of interest rates cuts by the ECB, short-term
bonds resulted more attractive than long-term issues. Indeed, bonds with remaining
maturity between 3 and 5-year attracted 39.8% of the total transactions as compared to
23.7% for bonds with remaining maturity between 10 and 20-year. Of the 7,905 orders
executed on HDAT, 52.03% were purchases and 47.97% sales.