International government bond prices retreated in October, influenced by the improvement in equity market sentiment in conjunction with the reduction of the geopolitical risk premium reflected in lower crude oil prices. On November 6th, the Federal Reserve, confirming investor expectations, cut its key interest rates by a half percentage point; on the next day, however, the European Central Bank kept them unchanged.

On the domestic electronic secondary securities market (HDAT), bond prices fell between 19 and 312 price basis points (bps), albeit to a lesser extent compared to the fall of their core European counterparts. The 20-year bond maturing on 22.10.2022 suffered the heaviest losses closing at 106.03 to yield 5.40% on October 31 from 109.15 (5.16%) on September 30. The price of the 10-year benchmark bond maturing on 18.5.2012 was down at 103.14 (4.83%) from 104.56 (4.65%) respectively. However, while the Greek benchmark lost 142 bps, its German counterpart was down by 196 bps. The expectations of a Greek credit rating upgrade, eventually confirmed by Moody's to A1 from A2, contained the losses of the Greek bonds, a fact that was reflected in the narrower yield spread of the 10-year benchmark over Bunds. Indeed, the average yield spread declined to 31 bps in October from 34 bps a month earlier.

Recovering yields was reflected in an upward shifting and steeper yield curve, as the 3- to 20-year bond yield spread widened further to 191 bps at the end of October from 171 bps in the previous month. The 3-year bond yield stood at 3.49% on October 31 from 3.45% on September 30 and the 20-year at 5.40% from 5.16% respectively.

The rising trading activity for the fourth consecutive month registered a new record high. Turnover on HDAT reached EUR 69.30 billion in October, compared to EUR 66.40 billion in September and EUR 30.83 billion in October 2001.

Given the expectations of lower interest rates, investor interest focused on short- to medium-term bonds with maturity up to 7 years. In that segment of the curve, turnover reached EUR 37,731 million or 54.45% of the total. However, amongst individual bonds, the most actively traded was the 10-year benchmark with EUR 7,547 million worth of transactions, followed by the 5-year bond maturing on 19.4.2007 with EUR 6,089 million. Of the 12,337 orders executed on HDAT, 50.85% were purchases and 49.15% sales.