ECB buys €4.3bn worth of Cyprus government bonds

The European Central Bank’s (ECB) balance sheet holdings of Cyprus government bonds reached €4.29 billion after the Public Sector Purchase Program (PSPP) ended in July this year.

In the last month of net purchases, the ECB bought €55m of Cyprus government bonds, according to ECB data.

Furthermore, the weighted average duration of Cyprus bonds held on the ECB’s balance sheet is 9.25 years.

In June, the ECB acquired €41m of Cyprus bonds through the Central Bank of Cyprus, but had a net turnover of €247m after €1bn of Cyprus bonds expired the previous month.

Note that the ECB has announced its intention to reinvest maturing government bonds after the end of net purchases by the PSPP.

In addition, outstanding Cyprus government bonds acquired through the Pandemic Emergency Purchase Program (PEPP) amounted to €2.64 billion.

The net purchase will end in March 2022, with the ECB stating that reinvestment of expiring amounts will continue until the end of 2024, and that the phasing out of the program will take place “in a manner that does not interfere with the appropriate currency.” clarified. stance”.

Meanwhile, the ECB ended its net bond purchases in response to rapidly rising inflation, but in July it proceeded with its first interest rate hike in 11 years, voicing that “a future meeting of the Policy Board will likely lead to further normalization of interest rates.” ” emphasized. equivalent.”

Additionally, to prevent the monetization of eurozone sovereign bond yields in the secondary market, the ECB has announced approval of the Transmission Protection Instrument (TPI), which focuses on government bonds and other sovereign institutions, but also on private bonds. may be considered. When deemed necessary.

“As the Governing Council continues to facilitate monetary policy, the TPI will ensure that the direction of monetary policy is smoothly communicated across the euro zone countries,” the ECB said.

“The TPI could be activated to offset unwanted and erratic market developments that pose a serious threat to the transmission of monetary policy in the euro area,” the committee added.

However, activation of the TPI comes with a set of conditions, combined with compliance with the European Fiscal Framework and the state not being subject to excessive deficit proceedings.
A country will also be excluded if it is determined that there are no major macroeconomic imbalances or if there are imbalances, it has not taken appropriate steps to correct them.

At the same time, there must be sustainability in how finances are managed, and it must be ensured that national debts are equally sustainable.

Finally, under the terms of the TPI, eligible countries pursue sound and sustainable fiscal policies and commit to commitments under the Recovery and Resilience Facility (RRF), as well as the current first half-issued country Specific recommendations must be adhered to. Year. ECB buys €4.3bn worth of Cyprus government bonds

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