CBPP3 gross buying and net portfolio growth last month hit their second lowest levels since the programme began and its share of overall QE hit a new low. However, buying was stepped up in the first week of November and at the end of the month pre-holiday front-loading is set to begin.

According to figures released by the European Central Bank on Monday, gross CBPP3 purchases were around Eu4.037bn in October, when taking into account redemptions in the portfolio of around Eu600m. This is the second lowest since the programme began, behind only the Eu2.975bn registered in August, and down from around Eu5.01bn in September.

The net increase in the CBPP3 portfolio was Eu3.437bn – also the second lowest net increase under the programme, behind a Eu3.258bn increase in July, and down from Eu4.165bn in September.

“Even if we adjust the net secondary purchase amount for the roughly Eu600m in redemptions under the CBPP3 last month,” said Maureen Schuller, head of financials research at ING, “secondary buying was historically low at Eu2.3bn and down Eu1.6bn versus the secondary buying seen in September last year, the month that primary purchases peaked at Eu6.169bn.

“In our view, this confirms a further gradual reduction in covered bond purchases, which we expect to continue irrespective of whether the APP is extended by six months or not.”

Analysts at Citi also noted that CBPP3 contributed just 4% of net portfolio growth for the overall asset purchase programme (APP) last month, the lowest share since the programme began.

The pace of purchases accelerated last week, however, with ECB figures released on Monday showing that settled and outstanding purchases under CBPP3 increased Eu1.017bn, from Eu197.646bn to Eu198.663bn in the week to last Friday.

Portfolio redemption figures published yesterday (Tuesday) afternoon show that around Eu200m of CBPP3 holdings matured last week, implying gross purchases of around Eu1.217bn. This compares with gross purchases of around Eu1.156bn in the previous week, when no CBPP3 holdings matured.

Analysts estimated that around Eu280m of the gross purchases were bought on the primary market, out of a total of Eu1bn of CBPP3-elgible supply that settled last week. This implies average secondary market purchases of around Eu187m per day last week, up from around Eu107m per day in the previous week.

“This suggests that at least during the first week of November, secondary purchases were stepped up in comparison to October,” said Schuller.

The ECB also announced on Monday that APP purchases will be temporarily paused from 22-30 December, in anticipation of lower market liquidity during the holiday period and in order to reduce market distortion. Purchases will resume on 2 January.

“Moreover, purchases during the period 29 November to 21 December will be somewhat frontloaded to take advantage of the relatively better market conditions expected during the early part of the month,” it said.

The ECB has engaged in similar front-loading around seasonal suspensions and slowdowns in previous winter and summer holiday periods.