ECB’s Cyprus bond holdings drop to €6.46 billion in June

The European Central Bank (ECB) on Friday reported that the value of Cypriot bonds held under its Eurosystem portfolio decreased to €6.46 billion.

This reduction primarily stems from bond maturities through the Public Sector Purchase Programme (PSPP).

The ECB continues its balance sheet normalisation efforts under both the broader Asset Purchase Programme (APP) and the Pandemic Emergency Purchase Programme (PEPP) as part of its restrictive policies aimed at curbing inflation.

According to ECB data, the remaining balance of Cypriot bonds within the PSPP portfolio stood at €3.99 billion at the end of June, reflecting a decrease of €304 million due to bond expirations during the same month.

Moreover, the average weighted maturity of Cypriot bonds in the Eurosystem’s balance sheet was 8.02 years.

It is worth noting that since August 2023, the ECB ceased reinvestments from maturing bond proceeds, thereby tightening liquidity in the market and supporting broader efforts to reduce inflation.

As of late April, the total size of the Asset Purchase Programme (APP) amounted to €2.83 trillion, showing a decrease of €2.18 billion, with the largest reduction (€1.88 billion) recorded in the PSPP (government bonds), which maintains the largest remaining balance at €2.25 trillion.

The balance of Cypriot bonds under the PEPP remained unchanged at €2.47 billion as of the end of May, with no net purchases during the April-May period.

The average weighted maturity of Cypriot bonds under the PEPP was 7.74 years.

The total balance of the PEPP programme at the end of May remained at €1.66 trillion, of which €1.61 trillion consisted of government bonds.

In a decision announced by the ECB’s Governing Council on December 14, 2023, the full reinvestment of maturing amounts will continue until the first half of 2024, followed by a gradual reduction of the PEPP portfolio at an average monthly pace of €7.5 billion, with reinvestments to conclude by the end of 2024.