Value of Cypriot Bonds in Eurosystem Falls to €6.38 Billion
The ECB Continues Its Balance Sheet Reduction, Impacting the Value of Cypriot Bonds Held Through PSPP and PEPP Programs
The value of Cypriot bonds held by the Eurosystem under the Public Sector Purchase Program (PSPP) and the Pandemic Emergency Purchase Program (PEPP) dropped to €6.38 billion, as the European Central Bank (ECB) continues its balance sheet reduction in line with its restrictive monetary policy cycle.
According to ECB data analyzed by the Cyprus News Agency, the total remaining value of Cypriot bonds held by the Eurosystem, primarily through purchases by the Central Bank of Cyprus (CBC), accounted for 28% of the Republic's issued debt.
Specifically, by mid-August, the remaining value of Cypriot bonds in the PSPP portfolio stood at €3.99 billion, a decrease of €304 million due to the expiration of Cypriot bonds in June. The average weighted maturity of Cypriot bonds held on the Eurosystem's balance sheet was 8.02 years.
It should be noted that since August 2023, the ECB has ceased reinvesting proceeds from maturing bonds as part of its effort to shrink its balance sheet, thereby reducing market liquidity and supporting broader efforts to curb inflation.
As of the end of July, the overall Asset Purchase Program (APP)—of which PSPP is a part—totaled €2.8 trillion, marking a reduction of €33 billion. The PSPP saw the largest decrease of €26.7 billion, with a remaining balance of €2.22 trillion, the highest within the APP.
In addition, the value of Cypriot bonds held under the PEPP fell to €2.39 billion at the end of July, with net purchases down by €76 million between June and July. The average weighted maturity of Cypriot bonds under the PEPP was 8.04 years.
The total balance of the PEPP program decreased to €1.65 trillion by the end of July, with €1.6 trillion of that amount in government bonds.
It is worth noting that on December 14, 2023, the ECB Governing Council announced that it would continue full reinvestments of maturing amounts until the first half of 2024. Subsequently, it will begin reducing the PEPP portfolio at an average rate of €7.5 billion per month, aiming to end reinvestments by the end of 2024.
