After only Eu7bn of supply in June, net euro benchmark covered bond issuance in the first half of the year was minus Eu24bn, with analysts noting that the decline was most dramatic in the Eurozone, where the market effectively shrank as much as Eu92bn thanks to CBPP3.

According to Cristina Costa, senior covered bond analyst at Société Générale, euro benchmark supply for the first half came in at Eu61.25bn versus redemptions of almost Eu85bn, and taking only Eurozone volumes issuance was Eu45bn versus Eu72.5bn of redemptions. June was a major contributor to the overall declines, with the Eu7bn of issuance balanced against Eu26bn of redemptions.

“Taking into account year-to-date CBPP3 purchases of Eu64.9bn,” said Costa, “this means that the Eurozone covered bond market has shrunk by Eu92.4bn since the start of the year.”

The impact of the European Central Bank’s third covered bond purchase programme was highlighted by another analyst.

“The centralbankisation of the euro benchmark covered bond market, even more though taking into account only euro area issuers, is a clear side-effect of ECB QE,” he said.

“With still around Eu50bn of redemptions in H2 and the primary market being shut for the time being,” he added, “negative net supply will increase further in H2 2015.”

The negative net issuance in H1 varied across jurisdictions, with the Spanish market shrinking the most. Joost Beaumont, senior fixed income strategist at ABN Amro, noted that Eu7.3bn of issuance was more than offset by Eu23.3bn of redemptions of cédulas.

“This left negative net supply at minus Eu16bn, which was more than double that of the UK market (minus Eu7.6bn) that came second,” he added. “Third was France, which saw its market shrinking by some Eu5bn.”

He noted that the biggest growing jurisdiction was Canada, with Eu7bn of net supply, followed by Belgium with Eu3bn and Australia with Eu2.5bn.

Canada, with Eu7bn of gross supply, was the biggest non-Eurozone source of issuance in the first half, according to Matthias Melms, covered bond analyst at NordLB, while overall Germany was top, slightly ahead of France.

He highlighted a trend towards longer maturities in the first half, with five to seven year supply rising from a 31% share in 2014 to 29%, while three to five year supply fell from 38% to 16%.

Overall gross issuance was meanwhile down around 10% versus the first six months of 2014, according to Melms.

“On the primary market the issuance volume has been lower than expected so far,” he said. “Accompanied by a calming of the market after the Greece crisis, we are expecting more activity again here.”

Indeed Beaumont at ABN Amro suggested that any rebound in supply could be dramatic.

“Assuming that some kind of solution will be agreed during the summer holidays,” he said, “there is a risk that issuers will rush to the market from mid-August onwards, which could result in a supply overkill.”