Cypriot government bonds purchased under the European Central Bank’s (ECB) Pandemic Emergency Purchase Programme (PEEP) and the Public Sector Purchase Programme (PSPP) amounted to €6.97 billion according to the latest figures published by the ECB.
According to data processed by CNA, the net total balance of Cypriot bonds held by the ECB under the two programmes, amounted to €6,973 million in end-March 2022 and correspond to 27% of Cyprus issued public debt. Bond purchases in the secondary markets by the ECB compress bond yields facilitating low borrowing costs for the Euro area member states. Of the Cypriot bonds purchased by the Eurosystem programmes, 90% of the purchases are carried out by the Central Bank of Cyprus (CBC).
Constantinos Herodotou, Governor of the CBC has recently highlighted the importance of the ECB’s purchases programme on easing the upward pressures on Cyprus’ sovereign bond yields immediately after the outbreak of the Covid-19 pandemic.
“At the PEPP announcement, amid severe market fragmentation, the Cyprus 10-year sovereign bond yield increased to 2.21%, while within a quarter of these Eurosystem bond purchases dropped by 1.25% reaching 0.96% in June, exemplifying the benefits of these purchase programmes,” he said addressing a conference held on the occasion of the visit of ECB President Christine Lagarde in Cyprus in end- March.
Under the PEPP net cumulative balance of Cypriot government bonds at-end July amounted to €2,633 million with net purchases from 22 February to 22 March amounting to €119 million with the weighted average maturity (WAM) of the bonds held by the ECB at 8.55 years.
According to the ECB data, the net cumulative balance of Cypriot bonds purchased under the PSPP in end-March amounted to €4,340 million with net purchases in March amounting to €65 million. The bond’s weighted average remained unchanged to 8.77 years.
PEPP net purchases end in March 2022, ECB retains optionality
Although the ECB said that net purchases under the PEPP ended in March, reinvestments of the principal payments from maturing securities purchased under the PEPP until at least the end of 2024, with the ECB stressing that “in the event of renewed market fragmentation related to the pandemic, PEPP reinvestments can be adjusted flexibly across time, asset classes and jurisdictions at any time.”
The ECB furthermore made clear that “net purchases under the PEPP could also be resumed, if necessary, to counter negative shocks related to the pandemic.”
With regards to the APP, the ECB said that monthly net purchases will amount to €40 billion in April, €30 billion in May and €20 billion in June, noting that “the incoming data since its last meeting reinforce its expectation that net asset purchases under the APP should be concluded in the third quarter.”
As far the size of the net purchases in Q3 2022 is concerned, the ECB said these will “be data-dependent and reflect the Governing Council’s evolving assessment of the outlook.”
The ECB reiterated that the “intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when it starts raising the key ECB interest rates and, in any case, for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.”
Source: Cyprus News Agency