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Developments in the Greek government bond market - December 2003

19/01/2004 - Press Releases

Government bonds recorded gains on international markets during December despite the small correction in prices that started just before Christmas. European bonds were well supported by the strength of the Euro that recorded continuous new highs during the month. In the US, despite the accelerating economic growth the labour market did not show the expected improvement. In addition, at their last 2003 meeting at the beginning of December, both the FED and the ECB left interest rates unchanged at the historically low levels of 1% and 2% respectively, reinforcing market expectations that interest rates will remain at those levels for a considerable time in the future.

Greek government bonds trading on the electronic secondary securities market (HDAT) had a positive performance in line with the rest of the Euro-zone bonds. Price gains were in the range of 57-142 basis points amongst the benchmark bonds, with the 20-year bond (maturing on 22/10/2022) recording the highest gains. The 10-year benchmark (maturing on 20/5/2013) closed at 101.31 (with a yield of 4.42%) at the end of December from 100.33 (4.55%) on November 28. The average monthly yield spread between the 10-year Greek and German benchmark bond widened marginally to 12 basis points (bps) in December from 11 bps in the previous month.

The yield curve shifted downwards while steepening as yields at the short end of the curve fell 23 basis points compared to 11 bps at the long end. Therefore, the 3 to 20-year bond yield spread widened to 212 bps at the end of December from 200 bps at the end of November.

Market turnover on HDAT was EUR 34.02 billion in December, from EUR 70.07 in November, and compared to EUR 32,59 billion in December 2002. For the third consecutive month investors' interest focused on bonds with remaining maturity between 7 and 10 years that absorbed EUR 17.10 billion (50.2% of the overall volume). Amongst individual bonds traded on HDAT, the 10-year benchmark recorded the highest traded volume with EUR 10.06 billion. Its liquidity, as measured by the ratio of the monthly traded volume over the amount outstanding, declined to 148% from 287% in November. Of the 5,781 orders executed in HDAT during December, 52.38% were "sell" orders and 47.62% "buy" orders.

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