CBPP3 purchases reported by the ECB for last week were down only slightly, with an easing in the portfolio’s growth due to some €800m of redemptions, and market participants expect the Eurosystem to remain consistent in its support going into March, particularly in light of market uncertainty.

European Central Bank figures released on Monday show that in the week to last Friday (21 February), settled and outstanding CBPP3 purchases grew €345m, from €269.713bn to €270.058bn. Given that around €800m of CBPP3 holdings matured, according to data released yesterday (Tuesday), gross purchases were some €1.145bn, only slightly down on the €1.289bn of the previous week, when no CBPP3 holdings matured.

Last week €2.25bn of CBPP3-elligible supply settled, versus €3.5bn the week before, and CACIB analysts estimate the ECB’s purchases of new issues fell from some €571m to €384m, with average daily secondary purchases rising slightly from €144m to €152m.

The approaching turn of the month prompted Commerzbank analysts to last Wednesday ask anew whether the Eurosystem might cut from 40% the share of final issue sizes it seeks when placing its orders – following similar suggestions in January – and a sub-40% order for a €1bn short 12 year print from Crédit Agricole Home Loan SFH the next day that is the first and thus far only benchmark due to settle in March prompted wider speculation on the matter.

A syndicate banker said he would be surprised if the Eurosystem cut the regular size of its orders in the midst of the coronavirus outbreak.

“Given the Eurosystem’s tactics so far,” he said, “it would be very surprising, if – in times of presumably reduced fundamental economic activity – they withdrew their support now.”

Joost Beaumont, senior fixed income strategist, ABN Amro, said any reduction would be surprising, especially considering CBPP3’s recently-increased share of net APP purchases.

“The jury is still out,” he said, “but if this were the case, it would leave the covered bond market a bit puzzled.”

He said it is more likely the ECB would step up its buying amid the uncertainty global markets are facing.

“We still expect them to increase QE measures,” he said, “probably not by March, but perhaps in June.”