ECB programmes see purchases of €6.56bln in Cypriot bonds

The total purchases of Cypriot bonds by the European Central Bank (ECB) amounted to €6.56 billion, under the Public Sector Purchasing Programme (PSPP) and the Pandemic Emergency Purchase Programme (PEPP).

According to ECB data, the total purchases from the two ECB programmes at the end of July amounted to €6.56 billion and corresponded to 26 per cent of the debt issued by the Republic of Cyprus (based on the latest public figures). Bond markets from secondary markets are pushing government bond yields down while keeping borrowing costs low.

According to a report by the Cyprus News Agency (CNA), the net cumulative balance of Cypriot bonds purchased through the pandemic emergency purchase programme (PEPP), amounted to €2.41 billion at the end of July.

Net purchases during the period between October and November of 2021 came up to €110 million, with the average weighted maturity of Cypriot bonds held in ECB books totalling 9.68 years.

Regarding the PSSP, the net cumulative balance of Cypriot bonds in the ECB’s balance sheet at the end of December amounted to €4.14 billion, with net purchases in December standing at €51 million. The weighted average duration of Cypriot bonds is 8.77 years.

Meanwhile, purchases through the PEPP programme end in March of this year, with the ECB extending its reinvestment of bonds maturing by the end of 2024 (one-year extension) due to market uncertainty due to the Omicron variant.

At the end of January, the cumulative balance of purchases through PEPP amounted to €1.63 trillion, with the programme having a total budget of €1.85 trillion.

In addition, in the context of the gradual reduction of asset markets, and in order to ensure that the direction of monetary policy remains compatible with the stabilisation of inflation at its intended target in the medium term, the Governing Council, the main decision-making body of the ECB, decided to conduct net asset purchases at a monthly rate of €40 billion during the second quarter, followed by €30 billion during the third quarter. This will be carried out through the asset purchase programme (APP).

In April 2002, purchases through the APP programme increased to €40 billion to offset the end of PEPP purchases.

The objective of this was to make the post-PEPP transition smooth and avoid the possible negative consequences of a more abrupt discontinuation of institutional support.

Finally, at the end of January, the cumulative purchases through the PSPP programme came up to €2.5 trillion.