To cope with COVID-19, Nicosia has borrowed more than €3.5 bln this year from international markets through bond issues bought by the European Central Bank and the Central Bank of Cyprus through the public sector asset purchase programs (PSPP) and Extraordinary Pandemic Bond Purchase Program (PEPP).
The ECB in May bought Cypriot bonds amounting to an initial €481 mln as part of the €750 bln Pandemic Emergency Purchase Programme (PEPP) launched as a response to the coronavirus outbreak.
Meanwhile, ECB’s purchases of Cypriot bonds through the PEPP program amounted to €455 mln in the period June-July with the total amounting to €936 mln.
The weighted average maturity of Cypriot bonds amounts to 11.79 years.
The ECB’s purchase within the framework of the PEPP, coupled with the bonds acquired in the context of the Public Securities Purchase Programme (PSPP) bring the total Cypriot eligible debt held by the ECB to approximately €3 bln.
Currently, based on the purchases through the two programs, the amount of Cypriot bonds that the ECB holds in its balance sheet amounts to 14.7% of Cyprus total debt.
ECB bond purchases are made through secondary markets and significantly help the Member States to reduce borrowing costs amid the uncertainty caused by the Covid-19 pandemic, a worsening trend in bond yields, especially those issued by countries in the European South.
According to PSPP data, by the end of July, the ECB and CBC proceeded with net purchases of another €144 mln raising the total amount of net purchases in 2020 to €2.64 bln.
The weighted average maturity of Cypriot bonds on the ECB’s balance sheet amounts to 9.8 years.
The ECB’s total purchases of public assets through the PSSP amounted to €2.36 trillion at the end of July.
The ECB has already launched a purchasing new bonds program, buying €20 bln worth of assets per month (announced in early 2020) while additionally reinvesting amounts yielded from maturing bonds that were purchased earlier through the asset purchase program.
Meanwhile, the ECB decided in June to further strengthen the PEPP with an additional €600 bln in purchases, bringing the total amount of the program to €1.35 tln from €750 bln initially approved, while its validity is extended until at least June 2021 with a commitment to reinvest the revenue at least until the end of 2022.