Gross CBPP3 purchases fell to around Eu4bn in April, the first month in which the ECB lowered its overall QE target to Eu60bn per month, but the decrease in buying of some Eu700m from March was attributed to lower levels of eligible issuance rather than a change in the Eurosystem’s approach.

European Central Bank figures released yesterday (Wednesday) afternoon show that the CBPP3 portfolio increased Eu1.928bn in April. Taking redemptions of around Eu2.1bn into account, gross purchases totalled around Eu4.028bn.

This is a modest decrease from gross purchases of around Eu4.734bn in March and around Eu5.53bn in February.

As of 1 April, the ECB lowered its monthly target for buying under its asset purchase programme (APP) from Eu80bn to Eu60bn. The ECB’s combined holdings under the APP increased Eu62.638bn last month.

The reduction in overall purchases is expected to mainly come from the public sector purchase programme (PSPP). The PSPP accounted for Eu54.311bn of the net APP portfolio growth last month, compared with Eu68.814bn in March and Eu68.206bn in February.

Analysts suggested the fall in CBPP3 purchases last month could be explained by lower levels of eligible issuance, estimating that primary market buying fell from around Eu1.5bn in March to around Eu800m in April, while secondary settlements remained roughly in line.

“We therefore stick to the view that the CBPP3 will not be slowed down proportionately to the PSPP in a mechanical way,” said Florian Eichert, head of covered bond and SSA research at Crédit Agricole. “The evolution of gross settlements will rather depend on the level of primary market issuance as the CBPP3 is already operating with a fairly elevated level of secondary buying at the moment.”

Analysts expect CBPP3 purchases to continue at a monthly pace of around Eu3bn-Eu4bn.

ECB figures released on Tuesday afternoon show that in the week to last Friday, the CBPP3 portfolio increased Eu260m, from Eu216.114bn to Eu216.374m. Portfolio redemption figures released yesterday afternoon show that around Eu900m of CBPP3 holdings matured last week, implying that gross purchases were around Eu1.16bn – up from Eu897m in the previous week.

Two CBPP3-eligible benchmark covered bonds settled last week, totalling Eu2bn, of which analysts estimate the Eurosystem purchased around Eu500m. This would imply average secondary market purchases of around Eu132m per day last week.

This is a sizeable fall from around Eu300m per day in the previous week, which related to just three days of purchases, due to public holidays.

This week’s figures were released a day late due to public holidays on Monday.

Photo: ECB/Flickr