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Developments in the Greek government bond market - July 2004

06/08/2004 - Press Releases

After more than two months of decline, government bond prices rose on international markets in July. Market sentiment started improving since mid June and remained positive throughout July as economic data released during the month provided evidence of a slow-down in economic growth in the US and moderate core inflation. This reinforced investors' view that monetary policy tightening in the US will proceed at a gradual pace following the 25 basis points increase in interest rates by the FED on June 30.

Greek government bonds trading on the electronic secondary securities market (HDAT) recorded significant gains in line with the performance seen in the major international markets. Benchmark bond prices rose between 29 and 133 basis points (bps) with the highest price increase recorded by the 20-year benchmark bond (maturing on 22/10/2022) that closed at 111.88 (with a yield of 4.90%) at the end of July compared to 110.55 (5.00%) on June 30. The 10-year benchmark bond price (maturity 20/5/2014) gained 87 bps during the month rising to 100.50 (with a yield of 4.43%) on July 30 from 99.63 (4.54%) at the end of June. The reopening of this issue on July 13 was very successful with a bid cover ratio of 6.1 (compared to 3.75 at the previous auction) indicating a strong interest from both domestic and foreign investors. The average monthly 10-year yield spread between the Greek and the German bond benchmarks remained stable at 18 bps in July as in the previous month.

The yield curve shifted downward in July, with yields at the short (3-year) and at the long (20-year) end of the curve falling 11 bps while in the middle part of the curve 5 and 7-year bond yields declined 13 bps and 12 bps respectively. The inclination of the curve remained stable as the 3 to 20-year yield gap was 182 bps at the end of July as it was a month earlier.

Market turnover on HDAT was EUR 63.25 billion in July after the record high in June of EUR 80.48 billion and compared to EUR 60.34 billion in July 2003. The most actively traded bonds on HDAT were those with remaining maturity between 7 and 10 years, which absorbed 70% of the overall traded volume. Amongst individual bonds, the 10-year benchmark recorded once again the highest traded volume with EUR 31.75 billion worth of transactions, followed by the 10-year bond maturing on 20/5/2013 with EUR 5.43 billion. Of the 11,203 orders executed in HDAT in July 60.61% were "buy" orders and 39.39% "sell" orders.

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