Developments in the Greek government bond market - February 2005
08/03/2005 - Press Releases
After having reached historically low levels around mid
February government bond yields started rising on international markets closing
the month at considerably higher levels than at the end of January. This change
in market sentiment that led to a significant correction in government bond
yields and prices was triggered by the FED Chairman Mr. Greenspan's testimony to
the Senate on February 16. Mr. Greenspan delivered a positive message on the
economy while suggesting that bond yields were too low. Later in the month, the
selling pressure intensified following the release of strong economic data in
the US and the minutes of the FOMC meeting of early February when the FED had
increased interest rates by 25 basis points. In the minutes, the positive view
about the US economy was reaffirmed while it was noted that real interest rates
remain below levels that might assure stable inflation in the medium term.
In the Greek electronic secondary securities market (HDAT),
government bond yields rose during the second half of February, in line with the
performance seen in all the major bond markets. At the long end of the curve,
the 20-year bond yield increased by 11 basis points (bps) and at the short end
the 3-year bond yield was up by 10 bps compared to the levels seen at the end of
January. Therefore, the Greek yield curve became slightly steeper during
February with the spread between 3 and 20-year bond yields widening to 130 bps
from 129 bps at the end of January.
Greek bond prices on HDAT fell in the range 34-175 basis
points. Losses were higher at the long-end of the curve with the 15-year bond
(maturity 22/10/2019) price declining to 126.52 (with a yield of 4.06%) on
February 28, from 128.27 (3.93%) at the end of January. On February 17, EUR 5
billion of the new 10-year benchmark bond (maturity 20/7/2015) were issued via
syndication. The new 10-year bond traded on that day at around 99.50 (with a
yield of 3.74%) while it closed at 98.58 (3.86%) at the end of February. Its
average yield spread with respect to the German equivalent bond was 18 bps
during the period February 17 - 28.
Market turnover on HDAT in February was EUR 59.89 billion
compared to EUR 80 billion in January and EUR 51.38 in February 2004. The daily
average turnover in February was EUR 3 billion compared to EUR 4 billion in
January. The most actively traded bonds were those with remaining maturity
between 7 and 10 years, which absorbed EUR 29.98 billion, 50% of the overall
traded volume. Amongst individual bonds, the most actively traded was the old
10-year benchmark, maturing on 20/5/2014, that recorded EUR 13.29 billion worth
of transactions, followed by the 15-year bond maturing on 11/1/2014 with EUR
7.07 billion. Of the 10,204 orders executed on HDAT 49.9% were "buy"
orders and 50.1% "sell" orders.