The CBPP3 portfolio grew Eu2.075bn last week, with the pace of purchases accelerating on the back of the first full trading week and first settlements of new issues this year, but analysts noted that secondary purchases remained low.

European Central Bank figures released yesterday (Monday) afternoon show that settled and outstanding purchases under its third covered bond purchase programme grew from Eu143.931bn to Eu146.006bn in the week to last Friday.

The portfolio had grown Eu591m in the previous reporting period, but this figure related to only three trading days in which no new issues settled.

Four CBPP3-eligible deals, comprising Eu3.5bn of supply, settled last week, of which analysts estimated that the Eurosystem bought around Eu1.5bn. Assuming no redemptions, this implies the ECB bought on average around Eu110m per day on the secondary market.

Analysts noted that this represents a slowdown of secondary market purchases, compared with the average of Eu197m per day in the previous week, which, they added, was well below the average of around Eu365m per day since the programme started but roughly in line with purchases in the final weeks of 2015.

“The continued slowdown in secondary purchases reinforces the trend that the Eurosystem is shifting its focus more to the primary market,” said Jussi Harju, covered bond analyst at Barclays.

Analysts noted that buying under the public sector purchase programme (PSPP) rebounded last week to one of the highest increases under the programme, after below average volumes at the end of last year. ECB figures show that the PSPP portfolio increased Eu15.267bn to Eu515.169bn in the week to last Friday, compared with portfolio growth of Eu8.687bn in the previous week.

According to minutes of a 2-3 December meeting of the ECB’s governing council, released last Thursday, ECB executive board member Benoît Cœuré (pictured) noted that liquidity had partially dried up in the covered bond market as the year-end approached.

“With regard to the execution of the APP, market liquidity had remained broadly steady, although some deterioration had been reported in certain market segments, such as agency bonds and covered bonds,” he said. “No declining trend was observed in the trading volumes of German government bond futures, which, despite a brief dip at the end of November, had remained reasonably steady.”

Cœuré added that in anticipation of the expected decline in market liquidity around the year-end, there had been a frontloading of asset purchases since September 2015 to allow for lower purchases in December 2015, as had previously been flagged by the ECB.