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Developments in the Greek government bond market - October 2003

10/11/2003 - Press Releases

Sentiment deteriorated on international bond markets during October. The economic data released during the month provided further evidence that the pace of global growth is accelerating. The strength of the economic data had a greater impact on investors’ confidence than the reassuring comments by the FED at its October meeting. The FED reiterated the recent accommodative stance, suggesting that interest rates will remain low for a considerable period of time.

The performance of Greek government bonds trading on the electronic secondary securities market (HDAT) was in line with the rest of the euro-zone. The upgrade of the Greek long-term debt by the rating agency Fitch (from A to A+) had only a muted market impact with the yield spread between the Greek and the German 10-year benchmark bond narrowing temporarily to 11 basis points (bps), whereas the monthly average yield spread for October widened to 13 bps from 12 bps in September. Overall Greek bond prices declined in the range of 92-257 basis points erasing all the gains made during September. The 10-year benchmark bond (maturing on 20/5/2013 ) closed at 101.05 (with a yield of 4.45%) on October 31 compared to 103.27 (4.17%) at the end of September. The 20-year bond (maturing on 22/10/2022 ) recorded the highest price decline, from 112.61 (4.87%) at the end of October to 110.04 (5.06%) a month earlier, and the 3-year bond  (maturing 21/6/2006 ) the smallest, closing at 99.25 (3.04%) at the end of October compared to 100.17 (2.68%) on September 30.

 The yield curve shifted upwards and flattened considerably during October as yields at the short end of the curve rose 36-39 bps (3 and 5year yields) compared to 19 bps at the long end (20-year yield). The 3- to 20-year bond yield spread narrowed to 202 bps from 219 bps at the end of September.

 Market turnover on HDAT surged in October to EUR 79.72 billion, the highest level recorded so far, up from EUR 65.20 billion in September and compared to EUR 69.30 billion in October 2002. More than half of this volume (52%) was concentrated on bonds with remaining maturity between 7 and 10 years. The 10-year benchmark bond recorded the highest traded volume amongst individual bonds on HDAT with EUR 23.2 billion. Its liquidity, as measured by the ratio of the monthly traded volume over the amount outstanding, rose to 341% in October from 229% in September. Of the 13,858 orders executed in HDAT during October, 50.73% were “buy” orders and 49.27% “sell” orders.

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