Settled outstandings under CBPP3 rose Eu2.906bn last week, ECB figures released yesterday (Monday) show, while the pace of PSPP buying increased, with analysts suggesting the figures show the Eurosystem took the opportunity to buy more from investors amid the Bund sell-off.

As of Friday purchases settled and outstanding under the third covered bond purchase programme were Eu2.906bn higher than a week previously, taking the total volume from Eu75.070bn to Eu77.976bn.

Analysts observed that in the previous reporting period purchases had increased Eu2.458bn, noting that figure related to a four day trading week because of the 1 May bank holiday, which meant no settlements took place.

Calculating that primary settlements decreased last week from the previous week, they suggested that the implied increase in secondary purchases could be partially explained by market volatility last week on the back of sharp rises in Bund yields, encouraging investors to sell bonds.

“We had expected much slower portfolio growth given the slowdown in the primary activity,” said Jussi Harju, covered bond analyst at Barclays. “However, it appears that the recent sell-off in rates was sufficient to incentivise covered bond investors also to sell further holdings to CBPP3.”

Analysts at Crédit Agricole calculated that average secondary market settlements increased last week to Eu496m from Eu444m the previous week.

Florian Eichert, head of covered bonds and SSA research at Crédit Agricole, agreed the sell-off influenced yesterday’s figure to an extent but noted that the covered bond market had been relatively resilient to last week’s volatility.

“In the covered space I wasn’t aware of a lot of selling flows in the last week,” he said. “Some investors tried to reduce their interest rates exposure via derivatives but I don’t know of many investors that would have outright sold large blocks of bonds.”

“There was slightly more secondary buying because of the sell-off, I’m sure that was a factor,” he added, “but this was not a major divergence from the ECB’s steady buying path.”

The pace of purchases under the public sector purchase programme (PSPP) also rose, with settled purchases increasing last week by Eu13.653bn, up from Eu10.047bn the week before.

“The increase in purchases was no doubt related to the recent sell-off in rates that helped the euro system to pick up bonds in the secondary market,” added Barclays’ Harju.