International government bond markets recorded strong gains in May as growth prospects for the world economy remained uncertain while fears of deflation in the US and Germany started permeating financial markets. All this reinforced expectations of lower interest rates in the months to come boosting fixed-income assets. On June 5, the European Central Bank cut interest rates by 50 basis points.

Greek government bonds, trading on the electronic secondary securities market (HDAT), posted remarkable gains and reduced the yield gap with respect to the German equivalent bonds. Price gains were in the range of 113 · 589 cents. The 20-year bond (22.10.2022) recorded the highest gains closing at 117.13 (with a yield of 4.55%) at the end of May from 111.24 (yielding 4.98%) at the end of April. The 10-year benchmark bond (20.5.2013) closed at 106.28 (yield 3.82%) up from 102.27 (4.31%) respectively. The 10-year average yield spread over Bunds narrowed to 18 basis points (bps) in May from 20 bps in April.

The yield curve shifted sharply lower in May while steepening slightly, as yields at the short end of the curve fell more than at the long end, 45 bps versus 43 bps. At the same time, the decline in bond yields was more pronounced (around 50 bps) in the part of the curve covering maturities between 5 and 11 years, with the 7-year bond yield falling 54 bps. The 3- to 20-year bond yield spread widened to 208 bps at the end of May from 206 bps at the end of April. The 3-year bond yield was 2.47% on May 30 compared to 2.92% on April 30 and the 20-year bond yield was 4.55% compared to 4.98%, respectively.

Turnover in HDAT rose considerably in May to EUR 56.21 billion compared to EUR 39 billion in April and to EUR 51.53 billion in May 2002. Investors' interest focused on medium to long-term maturity bonds that attracted 67% of the total turnover. Amongst individual bonds, the 10-year bond maturing on 18.5.2012 and the 10-year benchmark were the most actively traded, with a respective volume of EUR 9.26 billion and EUR 8.04 billion. Of the 10,004 orders executed on HDAT, 51.52% were ?buy? orders and 48.48% ?sell? orders. Liquidity of the 10-year benchmark, as measured by the ratio of the monthly traded volume over the amount outstanding, rose to 161% in May from 106 % in April.