ANZ is expected to launch a euro benchmark tomorrow (Wednesday) after having announced a mandate today, while the ECB yesterday announced a Eu2.629bn increase in settled CBPP3 purchases to last Friday, reflecting an easing of its buying rate.

A deal for Australia & New Zealand Banking Group (ANZ) tomorrow would be the first new euro benchmark since deals for UBI Banca and BNP Paribas Home Loan SFH last Tuesday, although Landesbank Baden-Württemberg yesterday (Monday) tapped a mortgage Pfandbrief for Eu250m and on Friday DNB Boligkreditt sold a Eu500m seven year FRN. Syndicate bankers said that other issuance could emerge after public holidays today (Tuesday) in several countries, including France, today.

ANZ this morning mandated itself, Barclays, BNP Paribas and UBS for the new issue and a banker at one of the leads said that a maturity had not been immediately announced as the market offers great flexibility at the moment and the issuer will listen to investor feedback.

The last Australian euro benchmark was a Eu1bn seven year Commonwealth Bank of Australia deal on 21 October. That was priced at 7bp over mid-swaps and was said by the ANZ lead banker to be at 5bp, mid, this morning.

The increase in settled purchases under CBPP3 of Eu2.629bn in the week to last Friday announced by the European Central Bank yesterday afternoon represented a slowdown in the pace of buying from Eu3.075bn the previous week, but activity remains at the top end of expectations.

The total is now Eu7.408bn.

The average daily rate of purchases fell from Eu615m during the last weekly period to Eu526m in the latest week, bringing the overall daily average down from Eu597m to Eu570m. (This is based on the first week’s total of Eu1.704bn having captured only three days of buying – with secondary purchases being settled two days afterwards.)

The weekly figure for the first time reflected primary market buying under CBPP3, with new issues for Nordea Bank Finland, Credit Emiliano and UBI Banca having settled on or before last Friday.

[We incorrectly omitted UBI Banca from deals expected to settle by Friday in some previous articles – apologies for this.]

Central banks and official institutions were reported to have bought 22% of Nordea Bank Finland’s Eu1bn 10 year (equivalent to Eu220m), 30% of Credito Emiliano’s Eu750m seven year (Eu225m), and 27% of UBI Banca’s Eu1bn 10 year (Eu270m) – although these allocation figures to central banks do not only include CBPP3 buying but also sales not under CBPP3 and to accounts outside the Eurosystem.

Joost Beaumont, fixed income strategist at ABN Amro, noted that, with around Eu600m of purchases recorded in the latest figure reflecting this primary market buying, the rate of purchases in the secondary market had slowed from around Eu600m in the first two weeks of the programme to Eu400m.

“This is in line with our view that the ECB is likely to slow down its purchases on the secondary market, given that the paper is scarce due to negative net supply,” he said. “It also suggests that is has become more difficult to pursue investors to sell their covered bonds.

“Nevertheless, the Eu7.4bn exceeds our initial expectations, suggesting that there are upside risks to our estimate that the programme will total Eu50bn. Indeed, during the first three weeks of the first two covered bond purchase programmes the central bank bought Eu3.2bn and Eu1.3bn, respectively.”

He said that the ECB will need to bid more aggressively to continue buying significant amounts, with the impact on spreads thereby likely becoming more pronounced.

LBBW’s Eu250m tap of a June 2018 mortgage Pfandbrief at 22bp through mid-swaps yesterday that is understood to have been driven by Eurosystem CBPP3 buying leant support to this view, even if it was not in the secondary market. Some bankers have also pointed out that the question of what, if any, Eurosystem buying of retained issues there might be remains open.

ECB board member Yves Mersch is reported to have said yesterday that a parallel ABS purchase programme will start next week. Meanwhile, confirmation of a targeted Eu1tr expansion of the ECB’s balance sheet by president Mario Draghi on Thursday has reinforced market expectations of quantitative easing being expanded into government debt early next year.