CBPP3 outstandings increased Eu2.864bn last week, taking the total volume above the Eu60bn total of CBPP1 for the first time, and analysts said that secondary buying under the programme increased while primary market supply was more limited.

Monday’s figure, published by the ECB yesterday afternoon, takes the total volume of purchases settled and outstanding under the third covered bond purchase programme as of Friday to Eu62.862bn, up from Eu59.998bn at the end of the previous reporting period.

The ECB has passed the Eu60bn total in just over five months with CBPP3, whereas CBPP1 lasted a year.

Meanwhile, purchases under the Public Sector Purchase Programme (PSPP) increased by Eu14.716bn last week, lifting the total to Eu41.016bn, according to the ECB.

In the covered bond market two primary deals settled last week, Eu1bn 10 year issues from CaixaBank and Bankia, making CBPP3-eligible supply Eu2bn.

Analysts at Crédit Agricole estimated that the Eurosystem bought around Eu660m combined of the two deals and settled Eu2.204bn on secondary markets. This would suggest the ECB settled on average Eu441m per day last week after Eu413m per day in the previous reporting period, they added.

“On CBPP3 all we can say is steady as she goes with the only noticeable week on week changes being the result of changes in primary supply,” said Florian Eichert, senior covered bond analyst at Crédit Agricole.

“We don’t expect this pattern to change and should we at some point see a noticeable drop in secondary purchases this would not be the result of the Eurosystem being less aggressive. It would much more so be the result of less bonds being offered to them, which in turn would mean they have to become more aggressive to keep purchases on track.”

Analysts said next week’s figure might see a further decrease as eligible primary market supply settling this week will total Eu1bn, comprising Eu500m deals from Aktia Bank and Westfälische Landschaft Bodenkreditbank.

Joost Beaumont, senior fixed income strategist at ABN Amro, noted that total covered bond purchases in March will amount to more than Eu12bn, exceeding monthly totals of Eu11bn bought in the first two months of the year.

“Looking forward, we expect that the ECB will slow the pace of monthly purchases in coming months to around Eu8bn, from Eu11bn currently, as paper will become increasingly scarce, while the focus will also shift to government bonds,” he added.

Photo: Inauguration of the European Central Bank’s new premises, 18 March; Source: ECB