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Developments in the Greek government bond market - March 2009

07/04/2009 - Press Releases

Government bonds had a positive performance on international markets in March with yields falling on all maturities, except for 30-year bond yields in "core" Euro-zone markets (such as Germany and France) that rose slightly. This was the result of increased investor expectations of additional monetary policy easing worldwide in face of the further global deterioration of economic activity. On March 5, the European Central Bank cut official interest rates by 50 basis points (bps) to an historic low of 1.5%, while the Bank of England and the Swiss National Bank also reduced official interest rates during March. In addition, in the US, the Federal Reserve announced on March 18 its decision to purchase up to USD 300 billion of long-term government securities, over the coming six months, in order to help improve conditions in credit markets.

On the Greek electronic secondary securities market (HDAT), Greek government bond yields fell significantly across the whole maturity spectrum and in particular on the short end of the yield curve. Specifically, the 3-year benchmark bond yield fell by 46 bps (including rounding) to 3.81% at the end of March from 4.26% at the end of February while the 30-year benchmark bond yield declined by 3 bps to 6.06% from 6.09%. In addition, the yield on the new 10-year benchmark bond (maturity 19/7/2019), introduced in HDAT on March 6, fell by 36 bps to 5.74% at the end of March from 6.10% on its first day of trading. As a result, the yield curve was significantly steeper at the end of March, with the yield difference between the 30 and the 3-year bond yields widening to 225 bps from 183 bps on February 27. Finally, the average monthly spread between the Greek and the German 10-year bond yields widened further to 280 bps from 254 bps in February.

Benchmark bond prices rose between 37 bps and 270 bps, with the new 10-year benchmark bond recording the largest gain, as its price increased to 101.88 at the end of March from 99.18 on its first day of trading (March 6). The 30-year bond price rose to 79.62 at the end of March from 79.25 at the end of February, while the 3-year bond price to 101.34 from 100.09.

Trading volume on HDAT in March amounted to EUR 16.24 billion worth of transactions compared to EUR 13.88 in February and to EUR 8.62 billion in March 2008. The daily average turnover was EUR 812 million compared to EUR 694 million during the previous month. Investor interest was mainly focused on bonds with remaining maturity between 7 and 15 years, which absorbed EUR 7.80 billion worth of transactions, or 48% of the overall traded volume, while the most actively traded bond was the new 10-year benchmark with EUR 4.4 billion worth of transactions. Of the 3,134 orders executed on HDAT, 53.55% were "buy" orders and 46.45% "sell" orders.

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