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
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.