The latest CBPP3 data revealed the programme’s biggest week of purchases since the asset purchase programme was rebooted, with syndicate bankers saying the Eurosystem has stuck to final orders for 40% of new issues despite inconsistent behavior and a rumoured future cut.

€1.757bn of covered bond purchases settled in the week to last Friday (17 January) on the back of the reopening of the euro benchmark market the previous week. The CBPP3 portfolio nevertheless increased only €557m, on the back of some €1.2bn of redemptions.

€7.5bn of eligible euro benchmarks settled last week – the most of any week since the restart of net APP purchases in November – and Florian Eichert, head of covered bond and SSA research, Crédit Agricole, estimated that the Eurosystem bought €1.373bn, 18%, of the supply. This compares with a 21% share of eligible euro benchmarks for the Eurosystem in the last two months of 2019.

Another analyst said that recent lower allocations to central banks and official institutions could suggest that the Eurosystem is on some deals placing orders for 30% of new issues rather than 40%, as syndicate bankers had previously said was the case on deals settling since 1 November.

Syndicate bankers spoken to by The CBR who in aggregate have led all but three of this year’s eligible euro benchmarks could offer no evidence of cuts in the Eurosystem’s 40% order, but said different national central banks’ behavior could give the impression they were less concerned with the ultimate size of their allocations, particularly in cases where deals were increased from their minimum size.

One said that neither central banks nor issuers had been chasing for the Eurosystem’s order size to be increased as issue size increased, for example from a “benchmark-sized” transaction to a final €1bn amount.

“When other programmes were at their peaks,” he said, “the ECB would simply anticipate in advance that the issue size would grow to say, €1bn, and put in a large order to reflect this when the books opened.”

He added that some national central banks were displaying apparent indifference to relatively small Eurosystem allocations, of around 10% or lower, on deals this month.

“They’re not complaining,” he said, “whereas in the past, you’d be in trouble if you were cutting them out too much, so I’m not entirely surprised that some people are questioning if they’re really serious about this purchasing programme.”

However, he said harder data was needed to make any definitive conclusions about the ECB’s behavior, although it was likely that, amid supportive market conditions and heavily oversubscribed deals, the central back was assuming a reduced role in the primary market.

“At this stage, they’re quite experienced in how to work markets,” he said, “so perhaps they’re happy to see the market is very strong, and that they’re not necessarily needed so much.

“On the other hand,” he added, “they’ve committed to buy bonds, so they will continue to do that.”

Another banker noted a rumour the ECB is considering reducing CBPP3 volumes.

“In the past we’ve witnessed quite a few of these well prepared manoeuvres,” he said, “with the ECB testing the water to see how the market would respond, so I wouldn’t be surprised if this were the case with this rumour.”

However, he said he expected Eurosystem orders to remain consistent at least for the coming weeks.

Another syndicate banker highlighted that a €500m 10 year Belfius Bank issue on Tuesday attracted over €3.3bn of demand, as an indication that a large number of market participants believe ECB participation is here to stay.

“If you thought they were going to reduce their participation,” he said, “you would probably act somewhat more cautiously.

“Belfius is by all means a decent name, but nobody expected the riot that we saw.”

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