CBPP3 settlements dropped substantially last week as a fall in secondary market purchases outweighed a step-up in primary buying, with covered bond purchases lagging those of last month, while the APP recorded its lowest weekly increase since the target was increased.

European Central Bank figures released yesterday (Monday) afternoon show that settled and outstanding purchases under the third covered bond purchase programme increased Eu1.304bn, from Eu173.995bn to Eu175.299bn, in the week to last Friday. In the previous reporting period, the portfolio grew Eu1.742bn.

Eu2.5bn of CBPP3-eligible issuance settled last week, of which analysts estimated the Eurosystem bought around Eu735m – compared with around Eu210m of primary settlements in the previous reporting period.

Assuming no redemptions, this implies average daily secondary market purchases of around Eu110m, down from around Eu300m in the previous reporting period.

“At this pace May is set to record a further slowdown in the monthly covered bond purchases, with an aggregate Eu3.046bn bought in the first half of this month, less than half the total Eu6.614bn purchased in April,” said Maureen Schuller, head of financials research at ING.

Joost Beaumont, senior fixed income strategist at ABN Amro, suggested that the fall was caused by reduced market activity.

“It will be interesting to see whether the central bank will step up its purchases this week,” he said.

The public sector purchase programme (PSPP) portfolio grew Eu16.928bn last week, from Eu746.287bn to Eu763.215bn. This compares with portfolio growth of Eu19.766bn in the previous reporting period.

With the asset-backed securities purchase programme (ABSPP) contributing just Eu26m, the overall increase in the asset purchase programme (APP) portfolio last week was, at Eu18.258bn, the lowest since the ECB’s monthly QE target was increased from Eu60bn to Eu80bn on 1 April.

Next month the Eurosystem will begin buying under its new corporate sector purchase programme (CSPP). Some analysts said this could mean that CBPP3 purchases are further decreased, although others expect the recent run-rate of around Eu7bn per month to be maintained.