Developments in the Greek government bond market - May 2006
05/06/2006 - Press Releases
On international markets government bonds had a mixed
performance in May, with bond yields ending at higher levels in the US while
remaining stable or falling slightly in the Euro-zone. A sharp fall in global
equity markets and commodity prices around mid- May provided some support to
government bonds globally as investors were switching funds to safe haven
markets. This helped government bond prices in the Euro-zone to rebound slightly
and yields to fall on short to medium-term maturities, helped also by a
strengthening EUR (rising to 1.28 against USD at the end of May from 1.26 at the
end of April). However, European long-term maturity bonds remained under selling
pressure because of ongoing inflation worries. In the US, government bond yields
continued to trend upwards due to rising inflation concerns and uncertainty
about the future course of monetary policy by the Federal Reserve after their
16th consecutive increase in interest rates (to 5%) on May 10.
On the Greek electronic secondary securities market (HDAT)
the 30-year bond yield increased slightly, 3 to 10-year bond yields fell and the
20-year bond yield was virtually unchanged with respect to the levels recorded
at the end of April. More specifically, the 3-year bond yield declined to 3.64%
on May 31 from 3.71% at the end of April and the 10-year bond yield to 4.28%
from 4.32%, while the 30-year bond yield rose to 4,70% from 4.66% and the
20-year yield stabilised around 4.48%. As a consequence, the 3 to 30-year yield
gap widened further to 107 basis points (bps) from 95 bps at the end of April
and 87 bps at the end of March. Finally, the average monthly spread between the
Greek and the German 10-year benchmark bond yields remained unchanged at 32 bps
as in April.
Benchmark bond prices increased by 23 to 43 bps on short to
medium term maturities while the 30-year bond price fell by 70 bps. More
specifically, the 3-year bond price rose to 99.30 at the end of May from 99.07 a
month earlier, the 10-year bond price rose to 94.45 from 94.11 and the 30-year
bond price fell to 96.66 from 97.36.
Trading volume on HDAT recorded EUR 51.10 billion worth of
transactions compared to EUR 42.42 billion in April and EUR 45.26 billion in May
2005. The daily average turnover was EUR 2.32 billion compared to EUR 2.36
billion in April. Trading activity was mainly focused on bonds with remaining
maturity between 7 and 15 years, which absorbed EUR 34.2 billion, or 67% of the
overall traded volume. The most actively traded bond was the 10-year benchmark
with EUR 15.42 billion worth of transactions followed by the 10-year bond,
maturing on 20/7/2015, with EUR 10.95 billion. Of the 8,939 orders executed on
HDAT, 50.49% were ''buy'' orders and 49.51% ''sell'' orders.