Kazamias: no decision on ECB buyback

FINANCE Minister Kikis Kazamias “clarified” yesterday that no decision has been taken by authorities here to ask the European Central Bank (ECB) to buy back government bonds.

The Finance Ministry released a statement noting that “no such decision” has been taken, adding that a bond buy-back was merely an idea mulled by the ministry and the Central Bank.

On Wednesday, Kazamias told reporters that the Finance Ministry along with Central Bank had “agreed it is an issue which is to be considered.”

He was responding to a question as to whether authorities might ask the ECB to buy back government bonds, in a bid to lower yields on government paper which have spiked on the secondary market in recent months.

In its statement yesterday, the ministry said that Kazamias “was merely noting that various ideas, one of which includes the above [the bond buy-back], are being floated within the open-ended agenda of meetings with the Governor of the Central Bank.”

“The Minister has never linked a possible intervention by the ECB in the bonds market to the banking system,” it added.

“The whole issue was never linked by the Minister to the bonds held by local banks in the domestic market.”

The ministry went on to stress “its commitment to smoothing-over conditions in the government bonds market through the consolidation of state finances and stabilising the credit-ratings issued by international agencies.

“Only then would be it feasible and useful to adopt any other supplementary measures aimed at improving market conditions.”

Cyprus has seen its borrowing costs on secondary markets surge on the back of repeated downgrades by ratings agencies because of fiscal slippage and exposure of its banking sector to Greek debt.

Cyprus will have to find investors to refinance €1.0 billion in maturing debt in the first months of 2012

In August the ECB drove yields on Italian and Spanish debt sharply lower when it bought sovereign bonds issued by both countries for the first time.

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