The Eurosystem registered a week-on-week drop in covered bond buying of some EUR221m last week, to EUR1.041bn, even as secondary market purchases increased and remained well above the 2018 average.

ECB figures released on Monday show that in the week to last Friday the CBPP3 portfolio increased from EUR247.742bn to EUR248.783bn. Figures released on Tuesday afternoon show that no CBPP3 holdings matured last week.

At EUR1.041bn, gross purchases were therefore down from EUR1.262bn in the previous week and below the year-to-date average of EUR1.356bn.

Two CBPP3-eligible deals settled last week, amounting to EUR1.25bn of supply. Distribution statistics show that central banks and official institutions bought 31% and 39% of the deals, respectively, and analysts estimate the Eurosystem bought a combined EUR300m from the two deals.

This implies secondary market purchases averaged around EUR148m per day, up from around EUR112m per day in the previous week and above the estimated year-to-date average of around EUR95m per day.

Primary market purchases accounted for the bulk of CBPP3 settlements at the start of the year amid heavy issuance, but secondary market purchases have since increased substantially – accounting for over half (EUR2.330bn) of February’s EUR4.381bn gross purchases.

“In our view, the developments in March are likely to be of a similar order,” said Karsten Rühlmann, senior investment analyst at LBBW.

He noted that euro benchmark covered bond issuance in March has averaged EUR12.7bn over the last 10 years, and therefore estimated that CBPP3-eligible supply this month will amount to around EUR8bn.

Including two new issues printed today, EUR6bn of CBPP3-eligible benchmark covered bonds have been issued this month.

“We expect a significant share of CBPP3 purchases to continue to be made through the primary market,” said Rühlmann. “Overall, therefore, we expect gross purchases of about EUR5bn this month.

“Of that amount, around one half should be bought in the primary market. After deduction of redemptions of EUR1.2bn, net growth of about EUR3.5bn to EUR4bn is expected.”

As of last Friday, net CBPP3 settlements since the start of the month totalled EUR1.679bn.