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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.

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