Developements in the Greek government bond market - September 2007
04/10/2007 - Press Releases
Government bond yields rose in September on international
markets, for the most part after the Federal Reserve (FED) cut official interest
rates by 50 basis points (bps) on September 18. The move contributed
significantly in easing tensions in financial markets, restoring confidence
amongst investors that shifted funds to riskier assets. In addition, oil prices
reached new historic highs, with NYMEX crude oil futures closing above USD 83
per barrel on September 20, the price of gold rose to USD 739 an ounce on the
same day, the highest level for the last 28 years, and EUR/USD posted an all-time
high of 1.4267 at the end of September. All these factors reignited fears of
inflationary pressures amongst investors with negative consequences particularly
on long-term maturity bonds.
On the Greek electronic secondary securities market (HDAT),
government bond yields rose marginally in September. The biggest increase, by 5
bps, was registered in the 10-year benchmark bond yield that closed at 4.65% (including
decimal rounding) on September 28 from 4.59% on August 31. The 3-year and the
30-year benchmark bond yields both rose by a modest 3 bps to 4.25% and 4.98%
respectively at the end of September from 4.22% and 4.95% at the end of August.
Therefore, the steepness of the yield curve remained unchanged in September with
respect to the previous month as the yield difference between the 30 and the
3-year bond yields was again 73 bps. Finally, the average monthly spread between
the Greek and the German 10-year benchmark bond yields widened slightly in
September to 32 bps from 31 bps in August.
Benchmark bond prices fell mainly at the long end of the
curve while the 3-year bond price remained virtually unchanged at 98.60 on
September 28 compared to 98.59 on August 31. The biggest price declines, by 51
and 40 bps respectively, were recorded by the 30-year benchmark bond, which
closed at 93.76 on September 28 from 94.27 on August 31, and by the 10-year
benchmark bond that closed at 97.23 from 97.63.
Trading volume on HDAT in September was EUR 34.35 billion
worth of transactions compared to EUR 28.43 in August and to EUR 52.45 billion
in September 2006. The daily average turnover was EUR 1.72 billion compared to
EUR 1.29 billion during the previous month. Investors’ interest was mainly
focused on bonds with remaining maturity between 7 and 10 years, which absorbed
EUR 17.25 billion worth of transactions or 50% of the overall traded volume,
while the most actively traded bond was the 10-year benchmark with EUR 12.3
billion worth of transactions followed by the 10-year bond, maturing 20/7/2016,
with EUR 4 billion. Of the 6,368 orders executed on HDAT, 52.9% were “buy”
orders and 47.1% “sell” orders.