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Developments in the Greek government bond market - April 2007

07/05/2007 - Press Releases

Government bond prices fell and yields rose in April on European markets for the second month in a row while in the US government bonds had a relatively positive performance and yields fell marginally on all maturities. These developments followed the release of strong economic data in the Euro-zone whereas the US economy continued to show signs of slow-down. In addition, despite repeated comments by Federal Reserve (FED) officials stressing their concern about current inflation and the uncertainty surrounding the near term inflation trajectory, markets still expect the FED to ease monetary policy. On the contrary, in the Euro-zone the buoyant economic outlook reinforced investors expectations of further monetary tightening by the European Central Bank.

On the Greek electronic secondary securities market (HDAT), government bond yields rose along the entire maturity spectrum, in line with the performance seen in the rest of the Euro-zone markets. The increase in yields was higher on bonds with remaining maturity between 3 and 10 years with both the 3-year and the 10-year bond yields rising by 15 basis points (bps) during April to 4.23% and 4.45% from 4.08% and 4.30% respectively at the end of March. The 30-year benchmark bond yield rose by almost 12 bps (considering the rounding), to 4.71% from 4.60%. As a consequence, the yield curve became flatter while shifting upwards, with the yield difference between the 30 and the 3-year bond yields narrowing to 48 bps from 52 bps at the end of March. Finally, the average monthly spread between the Greek and the German 10-year benchmark bond yields declined to 24 bps from 25 bps in March and February.

Benchmark bond prices fell between 24 and 193 bps in April. The highest losses were recorded by long-term maturity bonds with the 30-year bond price falling to 97.99 at the end of April from 99.92 at the end of March and the 10-year bond price to 98.73 from 99.95. The 3-year bond fell by 24 bps, closing at 98.32 at the end of April from 98.56 at the end of March.

Trading volume on HDAT in April was EUR 58.98 billion worth of transactions compared to EUR 62.51 billion in March and to EUR 42.42 billion in April 2006. The daily average turnover was EUR 3.10 billion compared to EUR 2.84 billion during the previous month. Trading activity was mainly focused on bonds with remaining maturity between 7 and 15 years, which absorbed EUR 36.53 billion worth of transactions, or 62% of the overall traded volume. The most actively traded bond was the 10-year benchmark with EUR 22 billion worth of transactions followed by the 10-year bond, maturing 20/7/2016, with EUR 10 billion. Of the 10,594 orders executed on HDAT, 50.1% were “buy” orders and 49.9% “sell” orders.

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