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Developments in the Greek government bond market - March 2005

08/04/2005 - Press Releases

Government bonds performance was generally positive in the Euro-zone markets while in the US the phase of bond yields correction that started in February continued during March. The slight decline in yields in the European markets was a response to the slow economic growth and the benign inflation outlook that persists in the euro area. Indeed, the ECB revised down its growth forecasts for the year 2005 (to 1.2%-2.0% from a previous forecast of 1.4%-2.4%) and while reaffirming its vigilance on price stability it also stated that there is no evidence of underlying inflationary pressures in the Euro-zone. On the contrary, bond yields rose in the US as economic recovery is stronger and the FED expressed concerns about future inflation at its last FOMC meeting on March 22, when it raised official interest rates by a further 25 basis points to 2.75%. 

In the Greek electronic secondary securities market (HDAT), government bonds performance was mixed during March. The best performer was the 32-year bond (maturity 20/9/2037) issued at the beginning of March. Its yield fell 10 basis points (bps) from the day it started trading on HDAT on March 3 until the end of the month. For all the other maturities, yields closed March almost at the same levels as at the end of February. The 20-year bond yield was around 2 bps higher, the 3-year yield fell 1 bps and the 10-year yield was unchanged. Therefore, the spread between 3 and 20-year bond yields widened to 133 bps at the end of March from 130 bps a month earlier, whereas the 3 to 32-year yield gap narrowed to 159 bps at the end of March from 165 on March 3.

The 32-year bond traded at 99.39 on HDAT on March 3 and closed at 101.01 at the end of the month, gaining 162 basis points. At the short end of the curve, prices rose 3 bps during March while fell 38 bps in the 20-year area. The new 10-year benchmark bond price (maturity 20/7/2015) rose to 98.60 (with a yield of 3.86%) at the end of March from 98.58 (3.86%) at the end of February. Its average yield spread with respect to the German equivalent bond was 20 bps in March from 18 bps in February.

Market turnover on HDAT declined slightly in March to EUR 56.06 billion from EUR 59.89 billion in February and compared to EUR 77.11 billion in March 2004. The daily average turnover was EUR 2.7 billion compared to around EUR 3 billion in February. The most actively traded bonds were those with remaining maturity between 7 and 15 years, which absorbed EUR 33.39 billion or almost 60% of the overall traded volume. Amongst individual bonds, the new 10-year benchmark was the most actively traded with EUR 15.45 billion worth of transactions, followed by the 10-year bond maturing on 20/5/2014 with EUR 5.39 billion. Of the 9,682 orders executed on HDAT 47.53% were ' buy ' orders and 52.47% ' sell ' orders.

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