Eurosystem participation in the first CBPP3-eligible deals of 2018 shows no evidence of a change in the ECB’s approach, despite the lowering of its overall QE target, according to bankers. Net CBPP3 portfolio growth fell to a record low in December, but largely on the back of heavy redemptions.

ECB figures released on Wednesday show the CBPP3 portfolio increased Eu760m in December, the lowest net increase in any month since the programme began and some Eu22m below the net increase in December 2016.

However, such a low figure had been anticipated, as ECB portfolio redemption figures had shown that Eu1.527bn of CBPP3 holdings would mature last month. December’s gross purchases of Eu2.287bn (Eu2.857bn taking into account a quarter-end amortisation adjustment), are more typical for a month affected by holiday periods, noted analysts.

“In other words, we are looking at a seasonal slowdown and most certainly not a change or shift in the general approach,” said Florian Eichert, head of covered bond and SSA research at Crédit Agricole. “Also, a look at the new issues so far in 2018 supports this theory.”

The ECB will this month target Eu30bn of purchases under the asset purchase programme (APP) following the lowering of the monthly target from Eu60bn at the end of last year. However, market participants expect the majority of the reduction in overall asset purchase programme (APP) buying to come from the public sector purchase programme (PSPP), and that CBPP3 buying will remain stable.

Syndicate bankers say the ECB’s participation in this week’s CBPP3-eligible deals has indeed been consistent with its participation last year, before the lowering of the QE target.

“I have seen no big drop-off in central banks’ appetite,” said a syndicate banker.

Available distribution statistics show that central banks and official institution share in Eurozone issuance has ranged between 38% and 54%, although this can include not only Eurosystem purchases but also buying from other entities in this investor category.

CBPP3 buying resumed on Tuesday of this week, following a suspension of the ECB’s QE purchases over the holiday period that commenced on 21 December. Hence no covered bonds were purchased under CBPP3 last week, and according to figures released on Wednesday, settled and outstanding purchases under the third covered bond purchase programme decreased Eu570m in the week to last Friday, from Eu241.257bn to Eu240.687bn.

Figures released yesterday (Thursday) show that no CBPP3 holdings matured last week, and that the entire reduction in CBPP3 holdings resulted from the Eu570m quarter-end amortisation adjustment.