Developments in the Greek government bond market - August 2004
07/09/2004 - Press Releases
Government bond prices soared in August on international markets extending
the gains recorded in July. Fixed-income assets were boosted by further evidence
that the pace of economic recovery in the US decelerated with negative
consequences for employment and consumer confidence. Moreover, the unrelenting
increase in oil prices during August, with NYMEX crude oil futures reaching the
level of 49.40 USD a barrel, raised worries amongst investors about its
implications for global growth. On August 10, the FED increased interest rates
by 25 basis points.
Greek government bonds recorded strong gains in August following the trend in
international markets. On the electronic secondary securities market (HDAT)
benchmark bond prices rose between 54 and 197 basis points (bps) with the
highest price increase recorded by the 20-year benchmark bond (maturing on
22/10/2022) that closed at 113.85 (with a yield of 4.74%) on August 31 from
111.88 (4.90%) at the end of July. The 10-year benchmark bond price (maturity
20/5/2014) rose to 101.90 (4.25%) at the end of August from 100.50 (4.43%) on
July 30. The average monthly 10-year yield spread between the Greek and the
German benchmark bonds remained stable at 18 bps for the third month in a row.
The yield curve became steeper while shifting lower in August, as yields at
the short end of the curve (3-year maturity) declined by 21 bps while at the
long end (20-year maturity) by 15 bps. The spread between 3 and 20-year bond
yields therefore increased to 187 bps from 182 bps at the end of July.
Trading activity on HDAT was remarkably intense during August and market
turnover reached a new record high of EUR 96.98 billion after EUR 63.25 billion
in July, with an annual increase of 79%. As in July, the most actively traded
bonds on HDAT were those with remaining maturity between 7 and 10 years, which
absorbed 63% of the overall traded volume. Amongst individual bonds, investors'
interest focused on the 10-year benchmark that recorded EUR 41.43 billion worth
of transactions, followed by the 10-year bond maturing on 20/5/2013 with EUR
7.81 billion. Of the 16,785 orders executed in HDAT 52.05% were "buy"
orders and 47.95% "sell" orders.