The value of Cypriot bonds held by the Eurosystem through the Public Sector Asset Purchase Program (PSPP) and the Pandemic Emergency Asset Purchase Program (PEPP) fell to €6.38 billion, as the ECB continues to deleverage its balance sheet in context of the restrictive monetary policy cycle.
Based on the available ECB data, processed by the CYPE, the total balance of Cypriot bonds held by the Eurosystem (mainly through purchases from the CBC), corresponded to 28% of the Republic's issued debt.
In particular, in mid-August the balance of Cypriot bonds in the PSPP portfolio stood at €3.99 billion in mid-August, registering a decrease of €304 million due to the maturity of Cypriot bonds in June. The weighted average duration of Cypriot bonds on the Eurosystem's balance sheet amounted to 8.02 years.
It is recalled that from August 2023, the ECB ended the reinvestment of amounts from bond maturities, as part of the shrinking of its balance sheet, thus “collecting” liquidity in the market, strengthening the broader effort to reduce inflation.
The broader Asset Purchase Program (APP) (of which the PSPP is a part) at the end of July amounted to €2.8 trillion, showing a decrease of €33 billion, with the largest decrease (€26.7 billion) recorded in the PSPP program (government bonds), which had the largest balance with €2.22 trillion.
Reduction in the balance of Cypriot bonds under the PEPP
Furthermore, the value of Cypriot bonds under the PEPP program fell to €2.39 billion. at the end of July, as net purchases were down 76 million in the June-July period. The weighted average maturity of Cypriot bonds under the PEPP amounted to 8.04 years.
The total balance of the PEPP program at the end of July decreased to €1.65 trillion. , of which €1.6 trillion concerned government bonds.
It is noted that on 14 December 2023, the Governing Council of the ECB announced that it would continue full reinvestments of amounts maturing until the first half of 2024 and it will then start reducing the PEPP portfolio at an average rate of €7.5bn each month and end reinvestments at the end of 2024.
Source: KYPE
