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.