The CBPP3 portfolio increased €1.175bn last week in the first full week of settled purchases since APP net buying restarted, with Eurosystem activity increasing commensurately with the ECB’s renewed QE ambitions, and covered bonds contributing a higher share than in 2018.

Settled and outstanding purchases under the third covered bond purchase programme (CBPP3) increased from €260.875bn on 1 November to €262.050bn on Friday, according to figures released by the ECB yesterday (Monday).

The Eurosystem restarted asset purchase programme (APP) net purchases – on top of reinvestments of portfolio redemptions – on 30 October. This meant that only one day of secondary market purchases could be included in the previous week’s figures, given their T+2 settlement and the official 1 November restart date, whereas any primary market purchases made on 30 October contributed to last week’s increase.

Two CBPP-eligible deals that settled last week were issued on 30 October, a €500m 10 year for Deutsche Kreditbank and a €1.25bn seven year for BPCE SFH. Although the Eurosystem placed orders for some 40% of each transaction, according to bankers at the leads, it received smaller shares: exact allocations are not disclosed, but central banks and official institutions took 33% of the French issue, while central banks were allocated only 11% of the German deal. New issuance since DKB and BPCE settles this week or later, meaning their new issues are the only ones that contributed to the week’s increase in the CBPP3 portfolio. This implies the maximum Eurosystem take from the two deals was €467.5m, although possible participation by other central banks and official institutions mean its purchases could be lower, with one analyst estimating the Eurosystem’s shares at 10% and 22%, and hence a €323m total.

Figures released by the ECB regarding October APP activity illustrate how sharply the Eurosystem’s participation in the primary market has picked up since it moved from just reinvestments – when it typically bought 5% of eligible new issues – to new net purchases: across October it bought a mere €167m in the primary market, equivalent to 2.7% of some €6bn of eligible issuance, according to Crédit Agricole analysts.

According to figures released by the ECB today (Tuesday), no CBPP3 holdings matured last week. Using the abovementioned analyst’s estimate, this implies that secondary market purchases contributed at least €852m to last week’s increase, putting daily average secondary purchases at some €170m. This is above the average daily secondary market purchase level of 2017, which was around €137m, and well above levels in 2018 when the ECB was ratcheting down buying.

CBPP3’s contribution to the overall net APP increase last week was also higher than it was in 2018, according to Joost Beaumont, fixed income strategist at ABN Amro. Covered bonds’ share of last week’s increase was 14%, compared to 7.5% during 2018, while the contribution of the corporate sector purchase programme (CSPP) jumped to 33% from 15% and the public sector purchase programme (PSPP) share fell to 53% from 76%.

“This would imply quite a shift in focus of the net asset purchases,” said Beaumont, “although one must bear in mind that it is too early to draw any firm conclusions from one week’s figure.”