Developments in the Greek government bond market - February 2002
Trading activity was relatively calm in the Greek government bond market in February. Prices moved side-ways within narrow ranges in line with the performance observed in all the other European bond markets as investors kept a cautious stance in face of the growing optimism about global economic developments.
The turnover on the electronic market (HDAT) reached EUR 37 billion, more than double the figure seen in February 2001 (EUR 15 billion), but lower than last January's level (EUR 42 billion). Investor interest focused on medium-term bonds with maturities ranging from 3 to 7 years, which attracted 42% of the total HDAT turnover, while the longer end of the yield curve (bonds with maturity over 10 years) attracted 31% of the total. The most traded bond was the new 10y benchmark bond, maturing in May 2012, with transactions amounting to EUR 4.1 billion, of which 41.62% were purchases and 58.38% sales. Overall, of the total orders executed on HDAT 43.68% concerned purchases and 56.32% sales.
Prices rose marginally at the short to medium term part of the yield curve, partially recovering January's losses, while they fell at the very long end, as strong evidence signalling the end of recession in both the US and Europe had an adverse effect on long-term bonds. The cautious optimism created by positive economic data published in both sides of the Atlantic reduced the safe-haven appeal of long-term bonds while supporting equity markets. The 20y bond suffered the highest losses, 60 price basis points (bps), while 3y-7y bonds gained between 11 and 15 bps. The price of the new 10y benchmark bond remained virtually unchanged closing at 99.48 to yield 5.31% on February 28 from 99.49 (5.31%) on January 31.
The yield curve became slightly steeper as yields at the short to medium part were lower 2-7 bps, at the range of 10 to 15 years remained unchanged, whereas at the very long end (20y) were higher 5 bps. The 3y-20y yield spread widened to 127 bps at the end of February from 115 bps at the end of January. The average spread of the new 10y benchmark bond over Bunds widened slightly to 38 bps from 37 bps in January.