Government bonds continued to trade downward on international markets during July eroding the gains made during May and the first half of June. This reflected the gradually improving economic data, particularly in the US, and a re-adjustment of investors' expectations regarding future monetary policy after the optimistic statements by Mr Greenspan, Federal Reserve Chairman, on July 15. The latter seemed to indicate more positive growth forecasts by the Federal Reserve and associated lower prospects of unconventional monetary easing (purchase of government debt), which investors were anticipating, during the previous couple of months, given fears of deflation.

Greek government bonds trading on HDAT recorded significant losses with prices falling in the range 59-264 basis points thereby erasing almost all the gains made from around mid April until mid June. The 20-year bond (22.10.2022) recorded the highest price decline closing July at 112.29 (with a yield of 4.90%) down from 114.93 (4.70%) at the end of June. The 10-year benchmark bond (20.5.2013) ended the month at 102.95 (4.22%) compared to 104.96 (3.98%) on June 30. The 10-year average yield spread over Bunds reached a new historic low of 13 basis points (bps) in July compared to 15 bps in June.

The yield curve shifted higher becoming slightly flatter as yields at the short-end of the curve rose more than at the long-end. At the same time, the 5-year area of the yield curve underperformed significantly the rest, with yields rising 28 bps as compared to 21 bps at the short-end (3-year area) and 19 bps at the long-end (20-year). The 3- to 20-year bond yield spread narrowed to 216 bps from 218 bps at the end of June.

Trading activity on HDAT remained intense in July, with a total turnover of EUR 60.34 billion, after having reached a peak so far this year of EUR 61.94 billion in June and compared to EUR 46.24 billion in July 2002. 'Sell' orders represented 52.77% of the 10,561 orders executed during the month while 'buy' orders were 47.23%. As in June, investors' interest focused on bonds with remaining maturity until 10 years. These attracted 78% of the total turnover. Amongst individual bonds, the 10-year benchmark bond was the most actively traded with a volume of EUR 15.59 billion and its liquidity, as measured by the ratio of the monthly traded volume over the amount outstanding, rose to 229% In July from 213% in June.