Developments in the Greek government bond market - January 2002
11/02/2002 - Press Releases
Higher turnover and further tightening of the spread over Bunds were
registered in the electronic secondary market (HDAT) in January compared with the year
before. Prices were mixed following the developments in the respective international
markets.
January turnover reached EUR 42bn from EUR 26 bn on average during
Jan.-Dec. 2001, and more than doubled from the level seen in January 2001 (EUR 20bn).
Investor interest was higher for maturities ranging from 6 up to 10 years which attracted
46.36% of the total HDAT volume. These bonds absorbed 48.02% of the total “buy” orders
executed on HDAT. More specifically, the 10y bond maturing in May 2011 recorded the
highest activity, with transactions amounting to EUR 5,193mn of which 49.30% were
purchases and 50.70% sales. Overall, of the total orders executed on HDAT 46.47% concerned
purchases and 53.53% sales.
Prices declined at the short to medium term part of the yield curve
following the developments in the bond markets in Europe and the US, as published economic
data served as evidence that economic decline was nearing an end. Moreover, the decision
of the European Central Bank and the Federal Reserve to keep interest rates unchanged had
an adverse effect on bond prices. Meanwhile, concerns of higher inflation risks in the
eurozone, due to higher food prices and rounding up of retail prices after the
introduction of the euro, pushed lower the prices of short and medium term bonds, which
suffered the highest losses. 3y bonds were down 61 price basis points and 5y bonds 73 bps.
The price of the new 10y benchmark bond (maturing on 18.5.2012) closed at 99.49 (yielding
5.31%), in January from 99.795 (5.27%) on the issue date (10.1.2002). In contrast, at the
longer part of the curve prices were higher in the range of 20 to 91 bps (15y and 20y
bonds respectively).
Yield movements resulted in a flatter yield curve. The 3y to 20y yield
spread narrowed to 115 bps at the end of January from 139 bps in December. 3y and 5y
yields were higher 16 and 17 bps respectively. On the contrary, 15y and 20y yields were
marginally down 3 and 8 bps respectively. The average spread over Bunds continued the
steady decline at 37 bps from 38 bps in December.
With economic growth expectations remaining relatively moderate and
inflation rates being on a declining track at the international level, despite the recent
upward blip, the economic background remains favourable for bond markets in the months
ahead.