Gross CBPP3 purchases fell to their lowest of any month in the history of the programme in August, at EUR1.673bn, on the back of record low primary market settlements amid a summer drought, and a lack of a typical compensatory step-up in secondary buying.

ECB figures released on Monday show the CBPP3 portfolio increased EUR1.198bn, from EUR255.946bn to EUR257.144bn, in August. This is the second lowest month on month increase since the programme was launched, behind this June — excluding Decembers when purchases were suspended during part of the month.

Given redemptions of EUR475m, gross purchases were EUR1.673bn, the lowest gross purchases of any month since the programme was launched.

Analysts noted that last month’s purchases comprised the lowest primary market settlements of any month under the programme, at just EUR228m. In August, EUR1.75bn of CBPP3-eligible benchmark issuance settled, all last week.

“Of this amount the CBPP3 only bought 13%, in line with the central bank’s low primary participation in the three months before – at 12% versus the 30% historical average,” noted Maureen Schuller, head of financials research at ING.

Last month’s secondary settlements were also some of the lowest recorded, at EUR1.446bn.

“We have had months with less secondary buying,” said Florian Eichert, head of covered bond and SSA research at Crédit Agricole, “but usually those months were characterised by a lot more primary buying to keep overall gross volumes between EUR3bn-EUR4bn.”

The overall asset purchase programme (APP) portfolio grew EUR24.822bn in August, some way short of the ECB’s monthly target of EUR30bn. CBPP3’s share of net settlements fell from 5.1% in July to 4.8% last month.

Gross CBPP3 purchases are expected to rise substantially in September – the last month in which the ECB will target EUR30bn of QE purchases, before a reduction to EUR15bn in October. This week EUR2.5bn of issuance will settle, and the primary market is expected to remain busy.

“September will most likely be more promising for activity levels,” said Eichert. “Issuers have already been rather busy so far this month and even if they decide to allocate the Eurosystem very little – we have not yet sensed actual orders to have come down – secondary markets will become much more active around the new issues.”

In the week to last Friday, the CBPP3 portfolio increased just EUR32m, from EUR257.112bn to EUR257.144bn. As EUR475m of CBPP3 holdings matured last week, gross purchases totalled EUR507m. These are the highest gross purchases since mid-July.

All of the EUR1.75bn of CBPP3-eligible issuance that settled in August did so over the course of last week, and the EUR228m of primary market purchases are included the settlements registered last week.

Secondary market purchases therefore averaged EUR55.8m, the highest weekly secondary market purchases in three weeks.