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Developments in the Greek government bond market - December 2004

17/01/2005 - Press Releases

Government bond markets had a positive performance in December with only short-term securities recording small losses. European bonds were well supported by the strength of the Euro that rose to a new historic high of 1.3637 versus the USD on December 30. In the US, the FED increased interest rates by a further 25 bps on December 14. This was the FED sixth move since June 2004 taking official interest rates to 2.25%.

Greek government bonds trading on the electronic secondary securities market (HDAT) followed the performance seen in the rest of the Euro-zone markets. Medium to long-term maturity benchmark bonds recorded gains in the range of 33 - 208 price basis points (bps) whereas the 3-year benchmark bond price declined 22 bps. The 10-year benchmark bond price (maturity 20/5/2014) rose to 105.39 (with a yield of 3.80%) at the end of December from 104.43 (3.92%) at the end of November. The average monthly 10-year yield spread between the Greek and the German benchmark bonds narrowed further to 12 bps from 16 bps during November.

Bond yields fell significantly at the long end of curve during December with 20-year yields declining 16 bps while at the short end of the curve 3-year yields rose 7 bps. Therefore, the yield curve became considerably flatter, with the spread between 3 and 20-year bond yields narrowing to 156 bps from 179 bps at the end of November.

Market turnover on HDAT declined considerably during December with respect to the previous month. Traded volume fell to EUR 37.39 billion compared to EUR 123.51 billion in November but rose around 10% with respect to December 2003 when it was EUR 34.02 billion. The most actively traded bonds were those with remaining maturity between 7 and 10 years, which absorbed EUR 22.63 billion or just above 60% of the overall traded volume. Amongst individual bonds, the most actively traded was the 10-year benchmark that recorded EUR 10.67 billion worth of transactions, followed by the 10-year bond maturing on 20/5/2013 with EUR 4.57 billion. Of the 6,412 orders executed on HDAT 50.40% were "buy" orders and 49.60% "sell" orders.

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