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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.

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