FINANCE: ECB buys Cyprus bonds after return to investment-grade status

The European Central Bank has started buying Cypriot government bonds following the upgrade of Cyprus’ credit status to investment-grade by Standard and Poor’s.

Purchases of Cyprus bonds by the ECB in the context of the ECB’s Public Sector Purchase Programme ceased in early 2016 after Cyprus concluded its bailout programme but its sovereign credit rating remained as junk status.

Under the ECB PSPP`s rules eligible countries should have investment-grade sovereign ratings by at least one rating agency or implement an economic adjustment programme with a positive review.

“Following the recent rating upgrade by S&P, and in line with the provisions in the ECB’s General Documentation, Cypriot government bonds have again become eligible for ECB monetary policy operations including purchases under the PSPP,” an ECB spokesperson told CNA.

“The Eurosystem has therefore re-started purchases of Cypriot government bonds (with settlement in October 2018),” the spokesperson added.

Until the end of net asset purchases (December 2018), the Eurosystem’s pace of purchase in Cypriot government bonds will take the specific market liquidity situation of the Cypriot government bond market into account in calibrating a gradual and measured increase in Eurosystem holdings towards Cyprus’ share in the ECB capital key.