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Developments in the Greek government bond market - February 2009

09/03/2009 - Press Releases

Government bonds had a positive performance on Euro-zone markets in February, while significant losses were recorded in the US, particularly on long-term bonds. Such developments, on the one hand, were the result of heightened investor expectations of further monetary policy easing by the European Central Bank and mounting concerns about the health of the banking system that drove investors to safe-haven assets. On the other hand, the increase in government bond yields in the US was due mainly to intensifying worries about rising debt issuance in order to tackle the economic recession.

On the Greek electronic secondary securities market (HDAT), Greek government bonds recorded significant gains with yields falling on each maturity except for the 15-year benchmark bond yield that rose slightly. Specifically, the 10-year benchmark bond yield fell by 19 basis points (bps) to 5.57% at the end of February from 5.76% at the end of January, the 30-year benchmark bond yield by 14 bps to 6.09% from 6.23%, while the 15-year benchmark bond yield rose marginally to 6.12% from 6.11%. In addition, on February 12 a new 3-year benchmark bond, with maturity 20/3/2012, has been introduced in HDAT and its yield was 4.26% on February 27 down from 4.35% on its first day of trading. As a result, the yield curve was significantly flatter at the end of February as compared to a month earlier, with the yield difference between the 30 and the new 3-year bond yields narrowing to 183 bps from 283 bps on January 30. In addition, the average monthly spread between the Greek and the German 10-year bond yields widened further slightly to 254 bps from 250 bps in January.

Benchmark bond prices rose between 67 bps and 157 bps, with the exception of the 15-year benchmark bond price that fell by 9 bps to 86.25 at the end of February from 86.34 at the end of January. The 30-year bond price recorded the highest increase to 79.25 at the end of February from 77.68 at the end of January while the 10-year bond price rose to 92.99 from 91.64. The price of the new 3-year bond closed at 100.09 on February 27 from 99.85 on its first day of trading.

Trading volume on HDAT in February amounted to EUR 13.88 billion worth of transactions compared to EUR 12.08 in January and to EUR 41.31 billion in February 2008. The daily average turnover was EUR 694 million compared to EUR 604 million during the previous month. Investor interest was mainly focused on bonds with remaining maturity between 7 and 10 years, which absorbed EUR 4.86 billion worth of transactions, or 35% of the overall traded volume, while the most actively traded bond was the 10-year benchmark with EUR 3.6 billion worth of transactions. Of the 2,698 orders executed on HDAT, 52.1% where "buy" orders and 47.9% "sell" orders.

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