CBPP3 purchases in May were the lowest of any month this year, as supply was harder to find, and the balance between primary and secondary purchases normalised. However, on the back of resurgent supply, last week the ECB recorded the highest purchases of any week since February.

ECB figures released on Monday show the CBPP3 portfolio grew EUR2.044bn in May. Gross purchases amounted to EUR3.179bn, given redemptions of EUR1.135bn. These are the lowest net and gross figures since December, down from net portfolio growth of EUR2.776bn and gross purchases of EUR3.909bn in April.

Some 45% of May’s net CBPP3 settlements came from the primary market.

“After a very heavy primary-driven April, the split between secondary and primary market settlements has normalised somewhat,” said Florian Eichert, head of covered bond and SSA research at Crédit Agricole. “Secondary net settlements in May were in fact the highest in six months, gross settlements the second highest.”

Svere Holbeck, senior analyst at Danske, noted that the shift came amid more limited primary market supply.

“Part of this recalibration reflects the fact that relatively little primary supply settled during May – we calculate only EUR6.3bn of eligible supply split on 11 deals, versus EUR13.3bn from 14 deals in April,” he said. “However, we also note that the share of primary purchases versus eligible supply is historically low, which is consistent with reports of a reduction in the CBPP3 bid for eligible primary deals.”

Analysts noted that CBPP3’s share of total asset purchase programme (APP) net settlements decreased from 9% in April to 6% in May, while the public sector purchase programme (PSPP) accounted for 77%, the same share as in April.

In the week to last Friday the CBPP3 portfolio increased EUR1.254bn, from EUR253.297bn to EUR254.551bn. Figures released yesterday (Tuesday) afternoon show that some EUR300m CBPP3 holdings matured last week, implying gross purchases of around EUR1.554bn.

These are the highest gross purchases of any week since the week commencing 5 February and the fourth highest of the year, up from around EUR538m in the previous week and well above the 2018 average of EUR1.038bn.

The rise in purchases was attributed to the volume of eligible issuance on offer, as EUR5.5bn of Eurozone covered bonds settled last week. Analysts’ estimates of the Eurosystem’s share of the seven eligible deals ranged from EUR900m to EUR1.3bn. This implies secondary market purchases averaged anything from EUR50m to EUR130m per day last week, compared with around EUR50m per day in the previous week.