16.08.2022
Cypriot bonds purchased by the ECB under the Public Sector Purchase Program (PSPP) totaled €4.29 billion at the end of July as the ECB stopped net purchases under its Asset Purchase Program.
In July, the last month of net purchases under the APP, of which the PSPP was a part, the ECB purchased €55 million worth of Cypriot bonds with a weighted average maturity of 9.2 years, according to the ECB. The ECB purchased €41 million worth of bonds in the previous month .
Following the cessation of net asset purchases, the ECB said it would continue to reinvest the principal amount of maturing securities.
In addition, the balance of Cypriot bonds purchased under the ECB Pandemic Purchase Program stood at €2.64 billion at the end of March 2022 . The ECB said it would reinvest securities with maturities “at least” until the end of 2024.
In an attempt to reverse soaring inflation in the euro area, the ECB entered a cycle of monetary policy normalization by raising benchmark interest rates for the first time in 11 years. In addition, the ECB has approved a new instrument, the Transmission Protection Instrument, aimed at preventing possible fragmentation of eurozone sovereign yields.
The ECB said TPI purchases would focus on public sector securities (marketable debt securities issued by central and regional governments and agencies as determined by the ECB) with remaining maturities of one to ten years. If necessary, consider purchasing private sector securities.
However, the TPI is accompanied by a number of criteria, namely compliance with the EU fiscal system: no Excessive Deficit Procedure (EDP) or no assessment as a failure to take effective action in response to a Council recommendation under Article 126(7) of the Treaty on the Functioning of the European Union ( TFEU) and no significant macroeconomic imbalances, no Excessive Imbalances Procedure (EIP) or no assessment as not taking recommended corrective action related to recommendations of the Council of the EU.
In addition, TPI depends on fiscal sustainability. Having satisfied that the trajectory of public debt is sustainable, the Board of Governors will take into account, where possible, the debt sustainability analysis undertaken by the European Commission, the European Stability Mechanism, the International Monetary Fund and others . and institutions, together with ECB internal analysis, while the countries concerned must demonstrate prudent and sustainable macroeconomic policies: adherence to the commitments presented in the Recovery and Resilience Plans for the Recovery and Resilience Fund and the European Commission’s country-specific fiscal recommendations within the European semester.
