CBPP3’s contribution to overall ECB QE in May was modest, with PSPP contributing almost all the monthly Eu80bn target for the second consecutive month ahead of the start of CSPP buying. However, gross CBPP3 purchases remained in line with April’s in spite of a slowdown in issuance.

Starting from 1 April, the monthly target of the ECB’s asset purchase programme (APP) increased from Eu60bn to Eu80bn. Some market participants had said CBPP3 purchases could increase slightly from the Eu7bn-Eu8bn run-rate recorded in previous months, to make up for a shortfall before the launch of a new corporate sector purchase programme (CSPP) – for which buying will commence tomorrow (Wednesday).

European Central Bank figures released yesterday (Monday) afternoon show net APP portfolio growth of Eu85.246bn in May, with the CBPP3 portfolio increasing a net Eu5.556bn and the public sector purchase programme (PSPP) portfolio a net Eu79.673bn.

Analysts noted the shares contributed by the programmes remained roughly in line with those in April, when the CBPP3 portfolio increased a net Eu6.614bn and the PSPP portfolio a net Eu78.499bn.

“For the second time running since the monthly pace was increased the Eurosystem easily managed to meet the Eu80bn figure by relying heavily on the PSPP in May,” said Florian Eichert, head of covered bond and SSA research at Crédit Agricole. “In fact the PSPP again almost managed to get the full target by itself.”

Analysts also highlighted that the net CBPP3 portfolio growth of Eu5.556bn last month is the lowest monthly increase this year, which they said reflected reduced issuance – May being the slowest month in terms of primary supply so far this year.

However, separate ECB figures show that some Eu1.3bn of holdings had matured between 1 May and the week ending 27 May, implying gross portfolio growth of around Eu6.856bn – which is roughly in line with a gross increase of Eu6.914bn in April, and only just short of the average Eu7bn-Eu8bn monthly run-rate recorded earlier in the year.

Month-end ECB figures also show that the Eurosystem bought Eu4.175bn of covered bonds on the secondary market last month, and Eu1.381bn on the primary market.

“When factoring in redemptions and looking at gross buying, the CBPP3 purchased Eu5.475bn in secondary markets, the highest number since August last year,” added Eichert.

ECB figures released yesterday afternoon also show a net increase in settled and outstanding purchases under CBPP3 in the week to last Friday of Eu973m, up from Eu177.386bn to Eu178.359bn. In the previous reporting period, the portfolio grew a net Eu1.18bn.

Eu500m of CBPP3-eligible issuance settled last week, of which analysts estimated the Eurosystem bought around Eu110m – compared with around Eu225m-Eu240m of primary settlements in the previous reporting period.

Assuming no redemptions, this implies average secondary market purchases of around Eu170m per day. Redemption figures for the purchase programme portfolios are released weekly, usually on Tuesday afternoons.