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Developments in the Greek government bond market - April 2008

13/05/2008 - Press Releases

Government bond prices fell and yields rose during April on international markets while yield curves flattened as the increase in yields at the short end of the curve was significantly larger than at the long end. Amongst the major factors leading to this performance were better-than-expected economic data releases in the US and evidence of accelerating inflationary pressures both in the US and the Euro-zone that led investors to scale back their expectations of monetary policy easing by both the Federal Reserve (FED) and the European Central Bank (ECB). During the month, the ECB had reiterated its intention to keep interest rates on hold while the FED cut official interest rates by 25 basis points (bps) on April 30. However, the FED statement released at the end of the meeting was interpreted by some investors as signaling the possibility of a pause in its easing cycle.

On the Greek electronic secondary securities market (HDAT), government bond yields rose in April, particularly at the short end of the yield curve, in line with the performance seen in the rest of the Euro-zone markets. Indeed, the 3-year benchmark bond yield rose by 17 bps to 4.22% at the end of April from 4.04% at the end of March whereas the 30-year benchmark bond yield rose by only 3 bps to 5.20% from 5.17% respectively. As a result, the yield curve flattened considerably with the yield difference between the 30 and the 3-year bond yields narrowing to 98 bps at the end of April compared to 113 bps at the end of March. Finally, the 10-year benchmark bond yield recorded an increase of 13 bps to 4.59% on April 30 from 4.46% on March 31 while reducing its average monthly spread with respect to the German 10-year benchmark bond yield to 51 bps in April from 62 bps in March.

Benchmark bond prices fell between 44 and 94 bps, with the 10-year bond price showing the biggest decline to 97.81 on April 30 from 98.75 on March 31. The 3-year bond price recorded a decline of 45 bps to 98.86 at the end of April from 99.31 at the end of March while the 30-year bond fell by 44 bps to 90.57 from 91.01.

Trading volume on HDAT in April amounted to EUR 17.68 billion worth of transactions compared to EUR 8.62 billion in March and EUR 58.98 in April 2007. The daily average turnover was EUR 884 million compared to EUR 453 million during the previous month. Investors' interest was mainly focused on bonds with remaining maturity between 7 and 10 years, which absorbed EUR 8.7 billion worth of transactions, or 49% of the overall traded volume, while the most actively traded bond was the 10-year benchmark with EUR 7.4 billion worth of transactions followed by the 5-year benchmark with EUR 1.4 billion. Of the 3,297 orders executed on HDAT, 52% were ''buy'' orders and 48% ''sell'' orders.

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