articles | 11 December 2023

Cyprus bonds steady at €6.75 billion amidst ECB monetary policy efforts

The European Central Bank’s continual balance sheet offloading in its battle against inflation has kept the value of Cypriot bonds held within the Eurosystem at €6.75 billion, according to a piece of analysis released by the Cyprus News Agency (CNA).

The analysis, which covered the period up to the end of November 2023, showed that Cypriot bonds in the Eurosystem balance sheet, facilitated through the Public Sector Purchase Programme (PSPP) and the Pandemic Emergency Purchase Programme (PEPP), remained steady at the aforementioned figure. Moreover, by the end of November, the value of Cypriot bonds in the PSPP portfolio held firm at €4.29 billion, with no Cypriot bond expirations occurring during this period. It should be noted that since August 2023, the ECB has ceased reinvesting proceeds from bond maturities, an element of its budgetary contraction, tightening liquidity in the market to bolster broader efforts aimed at curbing inflation. Consequently, the overall sum of ECB bond purchase programmes (APP) by the end of November stood at €3.04 trillion (with net purchases decreasing by €17.95 billion). Out of this total, €2.41 trillion is allocated to the Public Sector Purchase Programme.

Meanwhile, the value of Cypriot bonds within the PEPP portfolio experienced a marginal increase, reaching €2.45 billion by the end of November. During the October-November period, purchases amounted to €35 million. The total PEPP portfolio, as of December 1, stands at €1.66 trillion, with November’s net purchases valued at €814 million.

Notably, net purchases of bonds through the PEPP have ceased since March 2022, while bond amounts expiring until the end of 2024 will be entirely reinvested. The ECB Governing Council has confirmed that “the future gradual reduction (roll-off) of the PEPP portfolio will be regulated to avoid interference with the appropriate direction of monetary policy”.

Source: Cyprus Mail

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