Developments in the Greek government bond market - November 2008
05/12/2008 - Press Releases
Government bonds recorded remarkable gains on international
markets in November with yields falling to historic lows as the intensification
of the financial crisis led investors to focus on the most secure form of
investments. At the same time, macroeconomic data showed further deterioration
of economic activity at a global level, with major economies entering recession
during the third quarter of 2008, while inflation decelerated considerably. All
this factors reinforced investor expectations of a continuation of recent
monetary policy easing by the major central banks worldwide driving government
bond yields lower. In addition, because the level of uncertainty stemming from
financial market developments remained particularly high, yield spreads within
the Euro-zone widened slightly further as investors continued to favour
government bonds with the highest credit rating.
On the Greek electronic secondary securities market (HDAT),
government bonds recorded considerable gains along the whole maturity spectrum,
in line with the performance seen in the rest of the Euro-zone, however, yield
spreads with respect to equivalent German bonds widened further. The increase in
prices and the respective decline in yields were particularly pronounced for
bonds with maturity between 7 and 15-year. More in details, the 3-year benchmark
bond yield fell by around 28 basis points (bps) to 4.04% at the end of November
from 4.31% at the end of October, the 10-year benchmark bond yield declined by
65 bps to 4.85% from 5.50% and the 30-year benchmark bond yield fell by 9 bps to
5.48% from 5.57%. As a result, the yield curve steepened significantly, with the
yield difference between the 30 and the 3-year bond yields widening to 144 bps
at the end of November from 126 bps a month earlier. In addition, the average
monthly spread between the Greek and the German 10-year bond yields widened to
150 bps from 103 bps in October.
Benchmark bond prices rose between 63 bps and 474 bps, with
the 10-year bond price recording the highest increase to 98.08 at the end of
November from 93.34 at the end of the previous month. Strong price increases
were recorded also by the 7 and the 15-year bonds by respectively 309 and 346
bps to 95.77 and 92.81 on November 28 from 92.68 and 89.35 on October 31.
Trading volume on HDAT in November was relatively subdued and
amounted to EUR 7.64 billion worth of transactions compared to EUR 13.79 in
October and to EUR 40.35 billion in November 2007. The daily average turnover
was EUR 382 million compared to EUR 627 million during the previous month. The
most actively traded bond was the 10-year benchmark with EUR 2.2 billion worth
of transactions followed by the 3-year benchmark bond, maturing on 20/3/2011
with EUR 1.4 billion. Of the 1,453 orders executed on HDAT, 52.26% were "buy"
orders and 47.74% "sell" orders.