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.