Value of Cypriot bonds held by Eurosystem unchanged in November

The value of Cypriot bonds held by the Eurosystem remained unchanged at €6.75b in November, as the European Central Bank (ECB) continues deleveraging its balance sheet to reduce inflation.

According to the latest available data by end-November, the value of Cypriot bonds in the Eurosystem balance sheet, via the ECB’s Public Sector Purchases Programme (PSPP) and the Pandemic Emergency Purchases Programme (PEPP), remained broadly unchanged at €6.75b.

The value of Cypriot bonds in the PSPP portfolio remained at €4.29b by end-November, as there were no bonds maturing in this period.

Since August 2023, the ECB terminated reinvestments of maturing securities, in the context of the shrinking of its balance sheet, reducing liquidity in the markets, in a bid to bolster its monetary tightening efforts to curb inflation.

The broader Asset Purchases Programme (APP) balance in the end of November amounted to €3.04 trillion, with net purchases down by €17.9 billion, whereas the outstanding balance of the PSPP amounted €2.41 trillion.

Furthermore, Cypriot bonds held under PEPP rose slightly to €2.45b with net purchases in the period of October to November amounting to €35m. The PEPP’s total balance by December 1 amounted to €1.66 trillion with net purchases by end-November amounting to €814m.

In its latest monetary policy decisions, the ECB Governing Council reiterated that it intends to reinvest the principal payments from maturing securities purchased under the programme until at least the end of 2024, pointing out that “the future roll-off of the PEPP portfolio will be managed to avoid interference with the appropriate monetary policy stance.”

The Council also reiterated that it “will continue applying flexibility in reinvesting redemptions coming due in the PEPP portfolio, with a view to countering risks to the monetary policy transmission mechanism related to the pandemic.”

(Analysis by CNA)