The Eurosystem’s gross purchases of covered bonds last month hit their highest level since March and CBPP3’s share in the overall asset purchase programme almost doubled, in the final month before a halving of the ECB’s monthly QE target from EUR30bn to EUR15bn.

The European Central Bank on Tuesday said that net purchases were EUR2.65bn in September – their highest level since April – and taking into account a EUR524m quarter-end amortisation adjustment, the CBPP3 portfolio grew from EUR257.144bn to EUR259.270bn.

Redemptions were EUR1.465bn in September, meaning that gross covered bond purchases were EUR4.115bn, the highest in six months. Their contribution rose to overall QE rose from 5% in the previous two months to 9%, according to Joost Beaumont, senior fixed income strategist at ABN Amro.

“The figures reveal that the Eurosystem is back in the market,” he said, “keeping the private sector programmes sizeable (which is in line with its official communication). Of course, it is likely that the amount of net as well as gross purchases will decline on the back of the reduction in the monthly QE target from EUR30bn to EUR15bn.

“Indeed, the central bank has reduced its order size in the primary market, while it will most likely also slowdown its purchases in the secondary market. Still, we think that most of the reduction in monthly purchases will focus on the PSPP programme, which would increase the relative share of the CBPP3 in total QE.”

The Eurosystem has cut its typical order for new CBPP3-eligible benchmarks from 30% to 10% for deals settling this month, with this first becoming apparent on a Deutsche Kreditbank issue on Tuesday of last week (25 September). However, the latest CBPP3 figures incorporate only purchases that had settled up to and including last Friday and hence do not include any impact from the change.

Settled and outstanding CBPP3 purchases rose EUR486m last week, from EUR258.784bn to EUR259.270bn. Taking into account a redemption figure for the week of EUR400m released yesterday (Wednesday) and the quarter-end adjustment, gross purchases were EUR1.386bn, up from EUR745m the previous week and well above the 2018 average.