Held back by heavy redemptions, net CBPP3 portfolio growth slowed in June, even as gross purchases exceeded those of May, with the Eurosystem buying some Eu5bn of covered bonds last month. Gross purchases in the first half reached almost Eu30bn, around a third lower than H1 2016.

European Central Bank figures released on Tuesday afternoon show that net CBPP3 purchases totalled Eu3.263bn in June. Given redemptions in the portfolio of some Eu1.8bn, gross CBPP3 purchases amounted to around Eu5.063bn last month.

This compares with net portfolio growth of Eu3.553bn and gross purchases of around Eu4.653bn in May and is, analysts noted, roughly in line with average gross monthly purchases this year.

“In other words, June was a fairly normal month at around Eu5bn total buying, with primary buying stable and a slight pick-up in pace in secondary buying compared to what we saw in May,” said Florian Eichert, head of covered bond and SSA research at Crédit Agricole.

Analysts said the fall in net portfolio growth despite the higher gross purchases may mean the ECB is facing difficulties in increasing the portfolio, with the Eurosystem holding around 38% of CBPP3-eligible bonds.

“Looking forward, we expect that the central bank will continue to buy around Eu4bn-Eu5bn of covered bonds per month,” said Joost Beaumont, senior fixed income strategist at ABN Amro, “although the challenge that it needs to increase the outstanding amount, while also reinvesting maturing principals is likely to become more difficult.”

In the first half of 2017, the CBPP3 portfolio grew Eu19.114bn. However, analysts noted that gross purchases were much higher, at around Eu29.7bn, with larger amounts of the programme’s holdings maturing as it ages.

“With an extra Eu1.8bn in CBPP3 redemptions last month, we have easily surpassed Eu10bn for 2017 alone,” added Eichert, “highlighting the fact that the Eurosystem has purchased substantial volumes at the short end and that during the taper period reinvesting CBPP3 redemptions will play a substantial role.”

The first half figures represent a fall of over 50% from net portfolio growth of around Eu39.6bn in the first half of 2016, and a fall in gross purchases of around a third from Eu43.9bn. As with the first half of this year, the first half of 2016 includes three months in which the ECB’s monthly QE target was Eu80bn, after it was raised from Eu60bn in April 2016. The target was lowered from Eu80bn back to Eu60bn on 1 April this year.

In the week to last Friday, the CBPP3 portfolio decreased Eu207m, from Eu222.837bn to Eu222.630bn. The fall mainly reflects a quarter-end amortisation adjustment of Eu560m.

Portfolio redemption figures released yesterday (Wednesday) afternoon show that around Eu800m of CBPP3 holdings matured last week. Accounting for these redemptions and the quarter-end amortisation adjustment, gross purchases therefore totalled around Eu1.153bn.

This is a slight increase from gross purchases in the previous week, of Eu1.069bn, and the week before that, Eu1.096bn.

Three CBPP3-eligible deals settled last week, totalling Eu2bn of supply. Analysts estimated that the Eurosystem bought around Eu600m, implying that secondary market purchases averaged around Eu111m per day last week – down from Eu133m-Eu144m per day in the previous week.