EURO: ECB buys Cyprus bonds under QE

The Eurosystem resumed buying Cyprus government bonds in the secondary markets on Wednesday within the context of the ECB quantitative easing programme, with the debt bought so far totalling EUR 98 mln with an average maturity of 5.32 years.

Central Bank of Cyprus spokeswoman Aliki Stylianou said that the Cypriot bond purchases are expected to further compress the bonds’ yields in the secondary markets.
This is the second time since July that the ECB has been buying Cyprus bonds as part of the QE programme.
Stylianou said that when the first round of bond-buying started, yields dropped by 30 basis points, while as at September 30, the yields were down a further 5 points.
Secondary market buyers are mainly banks and investment funds that hold Cyprus government bonds, following the favourable review of the Cyprus bailout plan, while the ECB’s QE programme may also buy asset-based securities (ABS) and covered bonds, where Bank of Cyprus said that its own mortgage covered bonds have become eligible assets for Eurosystem credit operations.
This follows a rating upgrade to Baa3 from B1 by Moody’s, allowing the island’s biggest lender, that was “bailed in” by depositors in 2013 after it was forcibly merged with failed Popular Laiki Bank, to reduce its emergency liquidity assistance (ELA) reliance from EUR 11.4 bln in April 2013 to a current level of 4.5 bln.
Stylianou added that the QE programme also allows for the ECB to buy up to EUR 60 bln a month up to September 2016.
The total value of Cyprus bonds eligible for purchase in the QE programme is EUR 1.3 bln.