Οn international markets government bonds recorded losses in July after months of strong gains. 10-year bond yields in the Euro-zone increased by almost 10 basis points (bps) and in the US by 36 bps. Amongst the major factors driving bond prices lower and yields higher was the publication of upbeat economic data in the US that led investors to revise higher their expectations about future economic growth. Moreover, in the Euro-zone there were signs of recovery in business sentiment, helped by the continuous lower level of the EUR versus the USD, although consumer confidence remained subdued. Furthermore, the persistently high oil prices (with the NYMEX crude oil futures reaching a new record high of USD 61.3 per barrel in July) started raising some concern about the inflation outlook. The revaluation of the CNY by the Chinese authorities and the safe-haven flows driven by the terrorist attacks in London did not have a lasting effect on bond markets.

In the Greek electronic secondary securities market (HDAT) government bond yields rose over the entire maturity spectrum but with the biggest increase at the short end of the curve. The 3-year benchmark bond yield rose by 16 bps by the end of July as compared to the end of June, to 2.45% from 2.29% respectively. The 10-year yield increased by 4 bps to 3.44% at the end of July from 3.40% on June 30 and the 32-year bond yield by 5 bps to 4.07% from 4.02% respectively. Therefore, the yield curve flattened considerably (bearish flattening) as the 3 to 32-year yield gap narrowed to 163 bps in July compared to 173 bps in June. Finally, the average monthly yield spread between the Greek and the German 10-year benchmark bond yields narrowed to 23 bps from 25 bps during the previous two months. Benchmark bond prices in HDAT fell during July between 49 bps at the short end of the curve and 102 bps at the long end. The 3-year bond closed at 101.22 on July 29 from 101.71 a month earlier while the 32-year bond price declined to 107.46 from 108.48 respectively. The 10-year bond price fell to 102.14 at the end of July from 102.51 on June 30. The trading volume on HDAT in July was EUR 52.48 billion worth of transactions compared to EUR 61.61 in June and to EUR 63.25 billion in July 2004. The daily average turnover was EUR 2.5 billion, down from EUR 2.9 billion in June. Investors? interest was mainly on bonds with remaining maturity between 7 and 15 years, which absorbed EUR 32.48 billion or 62% of the overall traded volume. The most actively traded bond was the 10-year benchmark that recorded EUR 13.24 billion worth of transactions, followed by the 10-year bond maturing on 20/5/2014 with EUR 8.22 billion. Of the 9,320 orders executed on HDAT 52% were 'buy' orders and 48% 'sell' orders.