Developments in the Greek government bond market - September 2003
08/10/2003 - Press Releases
Government
bonds recorded significant gains during September after two and half months of
decline as sentiment turned positive on international bond markets. This
reflected investors’ response to economic developments in the
US
where the data released during the month showed that though economic recovery
is underway, unemployment remains at a high level, as a result of which consumer
confidence continues to be low. In addition, in the Euro-zone the economic
situation remained relatively weak, which led the IMF, in its last report, to
warn the ECB about the possible need of further monetary easing. As a result,
investors became more confident that interest rates are going to stay at
historic lows, both in the
US
and in the Euro-zone, in the near future.
On
the Greek electronic secondary securities market (HDAT), government bond prices
were on a rising trend for the whole of September and by the end of the month
they were up between 55-144 price basis points. The 7-year bond maturing on
19.5.2010 recorded the strongest gains closing at 113.27 (with a yield of 3.70%)
on September 30 from 111.83 (3.96%) at the end of August. The 10-year benchmark
bond (maturing on 20.5.2013) closed at 103.27 (4.17%) at the end of September
compared to 102.15 (4.32%) at the end of August. The monthly average 10-year
yield spread over Bunds narrowed to 12 basis points (bps) in September,
recording a new historic low, from 14 bps in August.
With
developments in the global economy reinforcing the view that interest rates will
remain unchanged at historically low levels for a relatively long period of time,
the yield curve became considerably steeper in September while shifting
downwards as yields at the short-end of the curve (3-year area) declined 34 bps
compared to 4 bps at the long-end (20-year area). The 3- to 20-year bond yield
spread widened to 219 bps at the end of September from 190 bps at the end of
August.
Market
turnover on HDAT rose to EUR 65.20 billion in September from EUR 54.24 billion
in August and compared to EUR 66.40 billion in September 2002. Bonds with
remaining maturity until 10 years were the most traded, attracting 84% of the
total turnover. The 10-year benchmark bond recorded the highest traded volume
amongst individual bonds on HDAT with EUR 15.57 billion. Its liquidity, as
measured by the ratio of the monthly traded volume over the amount outstanding,
rose to 229% from 205% in August. Of the 11,060 orders executed in HDAT during
September, 51.24% were “sell” orders and 48.76% “buy” orders.