Redemptions in the CBPP3 portfolio of some Eu18bn over the next 12 months, announced by the ECB yesterday, reveal a bias towards longer-dated purchases and imply even more sizeable long term reinvestments than forecast, according to analysts, who differ on the implications for 2018.

The ECB yesterday (Monday) published for the first time expected portfolio redemptions over a rolling 12 month horizon for the four individual programmes that constitute the asset purchase programme (APP). The figures show that Eu18.041bn of CBPP3 holdings are expected to mature over the next 12 months – up from Eu15.13bn over the last 12 months.

The figure for the coming 12 months is lower than analysts’ expectations, with many having forecast portfolio redemptions of around Eu2bn per month next year.

“This clearly implies that the ECB’s skew towards longer-dated covered bonds is even more significant than we thought,” said analysts at Rabobank.

This, analysts said, suggests the size of covered bond reinvestments will increase substantially in the coming years, after the APP is brought to an end.

The volume of monthly redemptions will fluctuate substantially, ranging from a low of Eu410m this month to a high of Eu3.202bn in June. January will have the second-highest redemptions, of Eu2.865bn.

“On the one hand, the relative volatility in the estimated redemption profile could provide a potential incentive for issuers to try to time the primary market,” said the Rabobank analysts. “On the other hand, the supply/demand dynamics will also depend on when the issuers with maturing bonds enter the market (i.e. if they need to pre-fund or if they can wait until the maturity of the bond).

“In addition, we wonder whether the ECB will show some degree of flexibility in accommodating the redemptions, and it is likely they want to smooth their purchases/reinvestments to mitigate cliff effects in redemptions in a particular month.”

Analysts disagreed on the impact of next year’s lower than expected redemptions on gross CBPP3 purchases. Some expect buying to remain at close to the current pace, with Joost Beaumont, senior fixed income strategist at ABN Amro, foreseeing Eu4bn-Eu6bn of gross purchases per month between January and October – the programme’s earliest end date.

“Overall, we still maintain our view about the impact that CBPP3 will have on the market next year,” he said.

However, Ted Packmohr, head of financials and covered bond research at Commerzbank, said that based on the announced reduction of net QE purchases from Eu60bn to Eu30bn from January, gross CBPP3 buying is likely to “shrink noticeably” next year.

“Nevertheless, it should still remain high enough to support covered bond spreads on a lasting basis,” he added.

ECB figures released yesterday show the CBPP3 portfolio grew Eu4.686bn in October. When redemptions of Eu502m are taken into account, gross purchases totalled Eu5.188bn.

The net portfolio growth was, on the back of the relatively low redemptions, the biggest monthly increase since January, when the portfolio grew Eu4.733bn. Gross purchases fell slightly from the Eu5.386bn recorded in September.

In the week to last Friday, the CBPP3 portfolio grew Eu689m, from Eu235.767bn to Eu236.456bn. This compares with a net increase of Eu884m and gross purchases of around Eu1.184bn in the previous week.

Redemption figures for last week will be published later this (Tuesday) afternoon, revealing last week’s gross purchase figure.