Primary surge boosts CBPP3, but secondary at snail’s pace
The pace of CBPP3 portfolio growth increased last week as its total rose Eu2.032bn on the back of a burgeoning primary market, but secondary activity slowed to a non-holiday low. Market participants are meanwhile awaiting details of new QE steps after the ECB raised expectations last Thursday.
According to figures released by the European Central Bank yesterday (Monday) afternoon, settled and outstanding purchases under the third covered bond purchase programme as of Friday stood at Eu128.133bn, up from Eu126.101bn a week previously. The Eu2.032bn increase was up from Eu1.474bn in the previous period
Analysts said that the rise was based on higher settlements of purchases of new issues, with six eligible deals totalling Eu4.75bn contributing some Eu1.641bn to this week’s figure, according to Florian Eichert, head of covered bond and SSA research at Crédit Agricole CIB. He noted that this meant that secondary market buying contributed only an average of Eu78m per day, which he said is the second lowest of the programme’s life, behind only the Christmas and New Year period.
Eichert forecast that this week’s total could be even higher, with seven deals worth over Eu5bn settling and potentially contributing Eu2.465bn to next Monday’s figure.
“Let’s see if the very low secondary settlements continue or if this is the proper start of a trend here,” he added.
The ECB on Thursday raised expectations of a bolstering of its quantitative easing efforts and many market participants are now anticipating hard news on this front after the next meeting of the governing council, on 3 December.
“All options for QE expansion and extension are on the table,” said analysts at Bank of America Merrill Lynch, “but what that means for ABS and covered bonds … remains to be seen.”
The ABSPP’s pace meanwhile fell back with an increase of Eu200m, after a high of Eu1.071bn the previous week, taking the total to Eu14.665bn. Purchases under the PSPP rose from Eu370.874bn to Eu383.070bn, an increase of Eu12.196bn, down slightly on the previous week’s Eu12.042bn.