The European Central Bank’s governing council will hopefully take into account which market sectors are most distorted when it plans the exit from QE, an official in the ECB’s market operations said at an ICMA CBIC/The CBR conference on Thursday, in potentially encouraging news for critics of CBPP3.

Market participants have been increasingly focusing on how the ECB will wind-down its asset purchase programme (APP), with a tapering of purchases widely expected to start sometime next year.

Speaking at an ICMA Covered Bond Investor Council and The Covered Bond Report conference last Thursday, Cornelia Holthausen, deputy director general, market operations, ECB, said the governing council had not yet decided the ECB’s exit strategy and that its approach will depend on developments.

“I can only imagine – and this is my own view – that the governing council would probably look at the developments in the real economy, but also, I hope, take into account the market perspectives – which are the asset classes where we might see more distortions, relative to others?” she said.

“I think all these aspects will be taken into account when deciding upon a potential reduction of purchases or in the reinvestment phase. At least, we would bring this to the attention of the governing council.”

Although Holthausen said the ECB has tried to avoid being disruptive in its actions, covered bond market participants have complained about some detrimental impacts of CBPP3. In a DBRS survey of covered bond and securitisation market participants published yesterday (Tuesday), for example, the ECB stopping purchases was deemed the number one priority for supporting the covered bond market.

ECB figures released yesterday afternoon show the CBPP3 portfolio increased Eu3.553bn in May. Taking redemptions of around Eu1.1bn into account, gross purchases totalled around Eu4.653bn.

This is up from gross purchases of around Eu4.028bn in April – the first month in which the ECB’s monthly APP target was reduced to Eu60bn – and not far off Eu4.734bn in March – when the monthly target was still Eu80bn.

Analysts attributed the rise in purchases to increased volumes of eligible issuance, noting that some 72% of May’s purchases came from the primary market, up from 39% in April.

Holthausen said primary market activity was one of several factors that influences the ECB’s net CBPP3 purchases, noting that CBPP3 buying has recently declined in line with reduced issuance. She also cited reduced secondary market liquidity as a consideration.

“For the private sector purchase programmes, we see what the market gives and how much we can purchase in a reasonable way, and then the rest of the promised Eu60bn or Eu80bn we buy via public sector purchases,” she said.

ECB figures released yesterday – a day later than usual, due to public holidays on Monday – show that in the week to last Friday, the CBPP3 portfolio increased Eu1.117bn, from Eu219.349bn to Eu220.466bn.

Portfolio redemption figures also released yesterday afternoon show that around Eu200m of CBPP3 holdings matured last week, implying gross purchases of around Eu1.317bn last week. This is up from around Eu728m in the previous week, and one of the highest weekly figures since the end of March.

Analysts estimated that Eu1bn-Eu1.2bn of last week’s purchases came from the primary market, with Eu4.25bn of CBPP3-eligible issuance having settled. This would imply that secondary market purchases averaged Eu23m-Eu63m – one of the lowest estimated daily averages recorded under the programme.

The ECB governing council will meet tomorrow (Thursday), and while no changes are expected to be announced to the parameters of its purchase programme, some market participants have speculated that certain dovish language could be removed from its statements.