May was another positive month for fixed-income markets globally after the strong gains recorded in April. Government bond yields continued to fall reaching new historic lows in the Euro-zone, in particular as regards the 10-year maturity (the 10-year German bond yield fell to around 3.28% and the equivalent Greek bond yield reached a historic low of 3.52%). Amongst the supportive factors for government bond markets during the month were disappointing macroeconomic developments both in the US and in the Euro-zone, the downgrade to junk status of General Motors Corp. and Ford Motor Co. bonds by Standard & Poor and political uncertainties in the Euro-zone. On May 3 the FED increased interest rates by 25 basis points, continuing its effort towards a more neutral monetary policy (taking official rates to 3%) while acknowledging a certain slowdown in growth.

Greek government bond yields fell in the electronic secondary securities market (HDAT) following the performance seen in the US and the other European markets. The decline was particularly significant in the middle part of the curve, with 5-year bond yields falling by 14 basis points (bps) and both 7 and 10-year bond yields by 13bps. This compares to a downward move of 11 bps for all remaining maturities. The 3-year benchmark bond yield declined to 2.49% at the end of May from 2.60% a month earlier and the 32-year benchmark bond yield to 4.18% from 4.29% respectively. As a result the 3 to 32-year yield gap remained unchanged in May at 169 bps as in April. The average monthly yield spread between the Greek and the German 10-year benchmark bond yields increased further to 25 bps in May from 24 bps in the previous month, with the Greek 10-year bond yield closing at 3.55% on May 31 from 3.68% on April 28. Increases in benchmark bond prices in HDAT during May ranged between 31 bps at the short end of the curve and 194 bps at the long end. The 32-year bond closed at 105.53 on May 31 from 103.59 at the end of April and the 3-year bond at 101.17 from 100.86 respectively. The 10-year benchmark bond price recorded gains of 106 bps rising to 101.22 at the end of May from 100.16 at the end of April.

Market turnover on HDAT declined slightly in May with respect to April to EUR 45.26 billion from EUR 46.83 billion respectively and compared to EUR 61.83 billion in May 2004. The daily average turnover was EUR 2.2 billion compared to EUR 2.3 billion in April. As observed in recent months, investors? interest focussed on bonds with remaining maturity between 7 and 15 years, which absorbed EUR 28.52 billion or 63% of the overall traded volume. Amongst individual bonds, the new 10-year benchmark was the most actively traded with EUR 11.294 billion worth of transactions, followed by the 10-year bond maturing on 20/5/2014 with EUR 6.17 billion. Of the 7,827 orders executed on HDAT 50.41% were 'buy' orders and 49.59% 'sell' orders.