Positive sentiment permeated through international bond markets for a second month running in January and government bond prices closed the month at higher levels as compared to the end of December. To this performance contributed the economic data released during the month that was consistent with an ongoing gradual recovery of global activity while inflation remained subdued. In addition, a supportive factor for Euro-zone bonds was the strength of the Euro that reached an historic high of 1.29 versus the USD. However, a significant correction in prices occurred at the end of the month following the FOMC meeting on January 28, which erased part of the gains recorded earlier. Indeed, despite the FED leaving interest rates unchanged at the historical low of 1%, its wording in the minutes led investors to believe that an interest rate rise might occur sooner than previously anticipated.

On the Greek electronic secondary securities market (HDAT) government bonds traded higher in line with the rest of the Euro-zone bonds. Price gains were in the range of 5-42 basis points amongst the benchmark bonds, with the 5-year bond (maturing on 18/4/2008) recording the highest gains. On January 13, a new 10-year benchmark bond was launched, with a 4.50% coupon and maturing on 20/5/2014. It closed at 100.31 (with a yield of 4.46%) at the end of January compared to 100.14 (4.48%) at the issuance. Because of the new benchmark, the 10-year Greek-German yield spread widened to around 20 basis points (bps) from 12 bps in December 2003 (calculated with the old benchmark). The difference in spread is due to the different maturity dates of the Greek and the German 10-year benchmarks: the Greek bond matures around five months later (20/5/2014) than the German (4/1/2014).

The yield curve shifted downwards while steepening slightly as 3 to 5-year yields fell around 10 basis points while the long end of the curve remained almost unchanged with the 20-year yield declining to 4.99% at the end of January from 5.00% on December 31. Thus, the 3 to 20-year bond yield spread widened to 221 bps at the end of January from 212 bps at the end of December.

Market turnover on HDAT was EUR 64.76 billion in January after EUR 34.02 billion in December 2003, with an increase of 8.5% with respect to January 2003 (when it was EUR 59.70 billion). Investors? interest focused on medium to long-term maturity bonds (7 to 20-year bonds) that absorbed 75.1% of the overall volume. Amongst individual bonds traded on HDAT, the 10-year bond maturing on 20/5/2013 (the previous benchmark) recorded the highest traded volume with EUR 15.09 billion, followed by the new 10-year benchmark bond with EUR 9.57 billion. "Buy" and "sell" orders in HDAT were almost equal. Of the 11,816 orders executed in HDAT during January, 50.3% were "sell" orders and 49.7% "buy" orders.