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Developments in the Greek government bond market - March 2007

11/04/2007 - Press Releases

Government bond prices fell and yields rose in March on international markets erasing part of the gains recorded during February. After having reached their lowest levels for 2007, government bond yields started rising again by mid March. The major factors leading to this performance were: a stabilization in the US sub-prime mortgage market, a recovery in international equity markets, after the strong correction that occurred during the first half of March, and positive macro-economic developments both in the US and in the Euro-zone. In addition, the European Central Bank (ECB) increased interest rates by 25 basis points (bps) to 3.75% on March 8 while stating that monetary policy continues to be on the accommodative side and liquidity in the Euro area ample. Finally, the Federal Reserve (FED), at its Open Market Committee meeting on March 21, stressed that inflation remains its predominant concern thus reinforcing market uncertainty about the timing of future interest rates cuts.

On the Greek electronic secondary securities market (HDAT), government bond yields rose in line with the performance seen in the rest of the Euro-zone markets. The 30-year benchmark bond yield recorded the biggest rise, by 14 bps, to 4.60% at the end of March from 4.46% at the end of February. The 3-year benchmark bond yield rose by 12 bps to 4.08%, on March 30, from 3.96%, on February 28 and the 10-year benchmark bond yield by around 9bps to 4.30% from 4.20% respectively (considering rounding). As a consequence, the yield curve steepened marginally while shifting upwards, with the yield difference between the 30 and the 3-year bond yields widening to 52 bps at the end of March from 51 bps a month earlier. Finally, the average monthly spread between the Greek and the German 10-year benchmark bond yields remained unchanged at 25 bps as in February.

Benchmark bond prices fell between 21 and 233 bps in March. The highest losses were recorded by long-term maturity bonds with the 30-year bond price falling to 99.92 at the end of March from 102.25 at the end of February and the 10-year bond price to 99.95 from 100.73. The 3-year bond recorded the smallest loss, by 21 bps, closing at 98.56 on March 30 from to 98.77 on February 28.

Trading volume on HDAT in March amounted to EUR 62.51 billion worth of transactions compared to EUR 45.29 billion in February and to EUR 64.40 billion in March 2006. The daily average turnover was EUR 2.84 billion compared to EUR 2.38 billion during the previous month. Trading activity was mainly focused on bonds with remaining maturity between 7 and 15 years, which absorbed EUR 36.42 billion worth of transactions, or 58% of the overall traded volume. The most actively traded bond was the 10-year benchmark with EUR 23 billion worth of transactions followed by the 10-year bond, maturing 20/7/2016, with EUR 8 billion. Of the 10,905 orders executed on HDAT, 48.3% were “buy” orders and 51.7% “sell” orders.

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