Conditions continued to be favourable in the international government bond markets, in contrast with equity markets, in September. The uncertain corporate, economic and geopolitical prospects heightened risk aversion and led investor interest to the safety of government bonds. Both the Federal Reserve and the European Central Bank kept once again interest rates unchanged.

Turnover reached new record highs on the electronic secondary securities market (HDAT), In September, turnover amounted to EUR 66.40 billion compared to EUR 57.23 billion in August and EUR 26.31 billion in September 2001. In September, HDAT saw yet another two record highs: daily turnover recorded EUR 5,310 million on the 24 of the month (the previous was EUR 4,650 million on May 21) and the daily average turnover recorded EUR 3,162 million (the previous was EUR 2,725 million in August).

The uncertainty about future economic developments and expectations for lower interest rates worldwide kept investor interest focused on short to medium-term bonds. Turnover on bonds with up to 7-year maturity amounted to EUR 38,165 million or 57.48% of the total. Among individual bonds, the most actively traded was the 5-year bond maturing on 15.1.2004 with EUR 7,365 million worth of transactions, followed by the 5-year bond maturing on 19.4.07 with EUR 6.954 million and the 10-year benchmark bond maturing on 18.5.2012 with EUR 6,389 million. Of the 11,771 orders executed on HDAT, 50.3% were purchases and 49.7% sales.

Bond prices were higher, between 88 and 191 price basis points (bps), for the fourth consecutive month. The price of 15-year bond maturing on 11.1.2014 recorded the strongest gains; from 112.64 (yielding 5.01%) at the end of August was up to 114.55 (4.80%) at the end of September. The price of the 10-year benchmark bond stood at 102.70 (4.89%) and 104.56 (4.65%) respectively, reaching the highest level since issued (99.795 on 17.1.2002).

The yield curve steepened significantly while moving downward during September as the 3- to 20-year yield spread widened to 171 bps at the end of the month compared to 148 bps a month earlier. The 3-year yield declined to 3.45% at month-end from 3.81% the previous month and the 20-year yield to 5.16% from 5.29% respectively.

The monthly average yield spread of the 10-year benchmark bond over Bunds narrowed to 34 bps from 35 bps in August.