Primary market purchases under CBPP3 overtook secondary purchases for the first time in September, ECB figures showed yesterday (Monday), while the pace of CBPP3 portfolio growth increased last week. Three Eurosystem members are meanwhile to hold new reverse auctions under PSPP.

European Central Bank figures released yesterday afternoon show settled and outstanding purchases under the third covered bond purchase programme increased Eu2.548bn to Eu122.803bn in the week to Friday. This compares with an increase of Eu1.993bn in the previous reporting period.

Seven CBPP3-eligible deals settled last week, totalling Eu5.25bn, of which analysts estimate the Eurosystem bought around Eu2bn. This, they noted, implied secondary market purchases of around Eu100m-Eu120m per day on average – in line with the rate of secondary buying the previous week.

Month-end data also released yesterday showed that as of 30 September, Eu26.138bn (21.62%) of the CBPP3 portfolio had been bought on the primary market and Eu94.777bn (78.38%) on the secondary. This compares with shares of 17.92% and 82.08%, respectively, as of 31 August.

Analysts noted this implied that Eu6.169bn of September’s Eu9.453bn cumulative purchases was bought on the primary market, a 65.3% share, meaning that, for the first time, the majority of a month’s purchases were bought in primary.

“Up until last month, the share of primary purchases under CBPP3 was on average only 18%,” said Maureen Schuller, head of covered bond strategy at ING. “The highest previous amount and share of monthly primary purchases was recorded in November last year, just after the start of the central bank purchase programme.

“In that month Eu4.313bn was bought in the primary market, equating to 33% of the total purchases – half the share of the primary purchases seen in September this year.”

With only one eligible deal settling this week, a Eu750m five year Bankinter issue of which the Eurosystem is thought to have bought around 48%, analysts said the pace of CBPP3 purchases would likely fall in next Monday’s figure.

Public sector purchase programme (PSPP) purchases last week fell to the lowest level since the programme began, with the portfolio increasing Eu8.436bn to Eu346.315bn. The portfolio increased Eu11.161bn in the previous reporting period.

The ECB meanwhile announced yesterday that it will this week begin trialling reverse auctions under PSPP, with the national central banks of France, the Netherlands and Lithuania.

The ECB said the series of auctions will be conducted “to gain experience with the use of reverse auctions in carrying out asset purchases in government, agency and supranational securities under the PSPP, without prejudging in any way whether the Eurosystem would consider applying auctions more systematically in asset purchase programmes in the future”.

It added that the move does not imply a change in any of the parameters of the PSPP, and noted that the reverse auction trials are targeting “a very small part” of the overall monthly purchases and are taking place alongside regular purchases.

“In our view, this follows a more direct approach related to its ABSPP,” said Joost Beaumont, senior fixed income strategist at ABN Amro, “suggesting that the central bank encounters some difficulties in boosting its balance sheet more generally. As such, it should not be ruled out that reverse auctions will also be introduced under CBPP3.”