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Developments in the Greek government bond market - March 2002

04/04/2002 - Press Releases

Adverse conditions prevailed in international bond markers in March 2002. Τhe prospective recovery both in the US and in the euro-zone shifted investor interest from government bonds to equities. These developments, combined with the absence of inflationary pressures and the prospect of benign inflation accompanying the first stages of recovery, increased the uncertainty regarding interest-rate policy.

Prices fell across international bond markets and also in the Greek electronic market (HDAT), particularly at the longer end of the yield curve. Nonetheless, Greek government bond market fared better than core European ones as reflected in the reduction of the 10-year benchmark bond average spread over Bunds from 38 basis points (bps) in February to 34 bps in March. The 15- and 20-year bonds recorded the highest losses of 236 and 302 price bps respectively, while in the medium part of the yield curve (5- and 7-year bonds) losses were moderate, in the range of 148-187 price bps. The 10-year bond closed at 97.47 (yielding 5.58%) at the end of March from 99.48 (5.31%) in February. Lower were the losses of the new 3-year bond issued on 15 March, whose price was at 100.010 at month end, down from the weighted average auction price 100.187.

The growing possibility of rising interest rates, especially in the US, resulted in higher government bond yields internationally. The yield curve shifted upwards, but became marginally flatter as yields at the short to medium part rose slightly more than the yields at the longer end of the curve. The 3- to 20-year yield spread narrowed to 124 bps at the end of March from 127 bps at the end of February.

The turnover on HDAT reached EUR 37.3 billion up from EUR 36.5 billion in February and more than doubled from a year earlier (EUR 18 billion in March 2001). Investor interest concentrated mainly on medium-term bonds with maturities between 3 and 7 years, which attracted 43% of the total HDAT turnover. The longer end of the yield curve (bonds with maturity over 10 years) attracted 32% of the total turnover. The most traded bond was the 20-year bond, with transactions amounting to EUR 4.3 billion, of which 48.35% were purchases and 51.65% sales. Of the total orders executed on HDAT 48.45% concerned purchases and 51.55% sales.

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