CBPP3 purchases slowed again last week with portfolio growth down to one of the smallest increases of recent months, at Eu907m, and analysts noted that buying is set to fall short of the recent run-rate, with some debating whether the “tapering” is intentional or enforced by a shortage of paper.

European Central Bank figures released yesterday (Monday) afternoon show that settled and outstanding purchases under the third covered bond purchase programme increased Eu907m, from Eu175.299bn to Eu176.206bn, in the week to last Friday. In the previous reporting period, the portfolio grew Eu1.304bn.

Eu1.5bn of CBPP3-eligible issuance settled last week, of which analysts estimated the Eurosystem bought some Eu375m-Eu420m – compared with around Eu735m of primary settlements in the previous reporting period.

Assuming no redemptions, this implies average daily secondary market purchases of around Eu100m, roughly in line with the rate of around Eu110m per day in the previous reporting period.

“While April saw slower primary purchases coincide with an increase in secondary purchases, May gives every indication that both primary buying and secondary buying is declining,” said Maureen Schuller, head of financials research at ING.

She said that with a month-to-date aggregate of Eu2.15bn, secondary CBPP3 purchases are set to fall to less than the previous slowest secondary purchase month since the programme began – when the ECB bought Eu2.726bn in the secondary market in March 2016.

Bernd Volk, head of covered bond and agency research at Deutsche Bank, said it could be argued that the ECB is tapering CBPP3 purchases.

“The ECB may or may not have intentionally reduced CBPP3,” he said. “In our view, it is more likely that the ECB has just shifted to other parts of its purchase programme where sourcing bonds was easier.”

Joost Beaumont, senior fixed income strategist at ABN Amro, said, however, that the reduced purchases were in line with ABN Amro’s view that the central bank will gradually reduce the pace of CBPP3 buying, as it already owns around one-third of CBPP3-eligible bonds in the iBoxx index.

Purchases under the overall asset purchase programme (APP) also fell last week, to Eu17.967bn, from Eu18.258bn, which was the previous low since the ECB’s monthly QE target was increased from Eu60bn to Eu80bn on 1 April.