ECB cuts Cypriot bond holdings to €6.38 billion

The value of Cypriot sovereign bonds held by the Eurosystem, as part of the Public Sector Purchases Programme (PSPP) and the Pandemic Emergency Purchases Programme (PEPP) declined to €6.38 billion, as the European Central Bank continues deleveraging its balance sheet in the context of its restrictive monetary policy cycle.

According to Eurosystem’s available data processed by CNA, by mid-August the value of Cypriot sovereign bonds held by the Eurosystem under the PSP and PEPP corresponded to to 28% of Cyprus’ public debt.

The value of Cypriot bonds under the PSPP portfolio declined to €3.99 billion by mid-August, due to the redemption of maturing bonds worth €304 million. The weighted average maturity of these bonds stood at 7.62 years.

The ECB as of August 2023 decided to discontinue reinvestments under the wider Asset Purchases Programme (part of which is PSPP) as of July 2023, reducing liquidity in the market complementing its restrictive monetary policy cycle to curb inflation.

The balance of the APP in end April amounted to €2.8 trillion, marking a reduction of €33 billion.

Furthermore, according to the Eurosystem’s data, the value of Cypriot bonds held under the PEPP also declined to €2.39 billion in mid-August, with cumulative net purchases dropping by 76 million in July.

On 14 December 2023 the Governing Council announced that it intends to continue to reinvest, in full, the principal payments from maturing securities purchased under the PEPP during the first half of 2024 and to reduce the PEPP portfolio by €7.5 billion per month on average over the second half of the year. At the same time, the Governing Council announced that it intends to discontinue reinvestments under the PEPP at the end of 2024.