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Greek Fixed Income Monitor - September 2015

September was characterized by the continuation of improving conditions for the government bond market relative to recent months, while markets remain cautious about developments in corporate but mainly in financial bond issues.

It is clear that corporate bonds are very closely linked to the evolution of macroeconomic factors. For example most credit rating agencies give greater weight to the domestic economic environment when rating corporate bonds. Given that in the second semester of 2015 macroeconomic data releases deviate substantially from leading indicators of economic activity, we observe an increase in uncertainty from possible delays in the implementation of structural reforms in the Greek economy.

Independently from economic developments, there was an improvement in September for all bond indices, with the Corporate Index increasing by 4.12% relative to August and the Financial Index recovering by 12.2% relative to the previous month. Nevertheless, on a Year to Date (YtD) basis, the Corporate Bond Index is lower by 11% relative to the start of 2015 while the Financial Bond Index has lost almost 45.3% of its value.

In contrast with the private sector bond indices, government bonds have improved substantially. In particular, the Government Bond Index has displayed an upward trend for the last two months. In addition, the index is significantly higher relative to the start of the year, by almost 20%, while in September a second consecutive rise of 7.07% on a monthly basis was recorded. We should note also that in the same month the index recorded a year-high value and stabilized at 350 points during the last 15 days of the month. That is the index recovered back towards its November 2014 level.

Ilias Lekkos

Group Chief Economist

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