The CBPP3 portfolio experienced its third highest week’s increase last week, with settled and outstanding purchases increasing Eu3.892bn after a surge in primary market buying, while analysts cautioned against reading too much into low secondary market purchases.

European Central Bank figures released yesterday (Monday) afternoon show the size of the CBPP3 portfolio increased from Eu112.215bn to Eu116.107bn last week.

Analysts said the week’s increase is one of the largest since the programme was launched, coming a week after the pace of portfolio growth had fallen to a record low of Eu1.099bn in the previous reporting period.

“The Eurosystem has thus in one week settled more bonds than half of the overall August purchases,” said Florian Eichert, head of covered bond and SSA research at Crédit Agricole.

Noting that 10 CBPP3-eligible deals settled last week, analysts estimated that some Eu2.9bn of the increase was bought on the primary market, implying average secondary purchases of less than Eu200m per day.

Jussi Harju, covered bond analyst at Barclays, said that a decline in secondary purchases was contrary to expectations that the Eurosystem would step up its secondary purchases after a summer lull in issuance had ended.

“That said, secondary purchases have been historically a function of primary supply where the Eurosystem has been able to easily source bonds,” he added.

“Recall that the main purpose of the QE programme is balance sheet expansion. Hence, from the Eurosystem’s perspective it is irrelevant if it sources covered bonds from the primary or secondary market.”

Crédit Agricole’s Eichert also cautioned against interpreting the low secondary rate as evidence that secondaries are stretched.

“Even though secondary settlements have trended down over the last weeks and months as it has become tougher to find substantial volumes, last week it was probably more of a conscious decision,” he said.

Meanwhile, the public sector purchase programme (PSPP) portfolio increased Eu13.022bn to Eu314.469bn last week, up from Eu11.910bn of growth in the previous reporting period.