CBPP3 registered a fall in purchases last week, leaving the programme on track to record the slowest month of 2017 in terms of gross purchases and one of the slowest months since its launch. Buying is expected to remain low in August, given the supply outlook and previous purchase patterns.

ECB figures released on Monday afternoon show that in the week to last Friday, the CBPP3 portfolio grew Eu762m, from Eu223.870bn to Eu224.632bn. Portfolio redemption figures released yesterday (Tuesday) afternoon show that around Eu100m of CBPP3 holdings matured last week. Gross purchases therefore amounted to around Eu862m, down from around Eu1.224bn in the previous week.

Two CBPP3-eligible benchmarks settled last week, totalling Eu1bn of supply, of which analysts estimated the Eurosystem bought around Eu300m. This implies secondary purchases averaged around Eu92m per day, down from around Eu145m-Eu165m per day in the previous week.

No CBPP3-eligible issuance will settle this week, meaning next week’s figure will relate only to secondary market purchases.

As of Monday, the CBPP3 portfolio had increased Eu2.002bn this month, with redemptions holding back growth despite gross CBPP3 purchases of around Eu2.902bn.

Analysts noted July is on track to be the slowest month in terms of gross purchases under CBPP3 since December, when the Eurosystem bought around Eu2.269bn of covered bonds – the programme’s record low. April is the slowest month of the year so far, with around Eu4bn of purchases, gross.

This month’s slowdown comes amid a scarcity of supply, with only three CBPP3-eligible benchmarks brought to market and none since 11 July.

Eurosystem covered bond purchases are expected to remain relatively low next month, with supply and liquidity likely to be limited during a summer lull.

Analysts at Citi noted that overall APP purchases have exceeded Eu62bn that in each month since the ECB lowered its monthly QE target to Eu60bn in April. They suggest that, should July’s purchases remain at around the same level, purchases could fall to around Eu52bn in August to level out at an average of around Eu60bn. They also noted that in August 2016, QE purchases fell by 25% from the previous month.

“As in the past, we expect the bulk of the seasonal fall in QE purchases to be recorded under the PSPP programme, given the better liquidity and therefore higher flexibility to steer monthly purchases,” said Michael Spies, covered bond and SSA strategist at Citi. “Nonetheless, as seen particularly in 2015, the ECB will probably try to act with consideration and not bid aggressively on covered bonds in a less liquid month.

“And given the lower expected supply during August, gross purchases under CBPP3 should eventually be lower anyway given the ECB’s increasingly strong reliance on the primary market.”