The Eurosystem made a net €3.684bn of CBPP3 purchases in January, the highest monthly amount since November 2017 and 18.1% of the month’s €20.346bn APP increase, although this was on the back of the seasonal primary market boom, leaving analysts divided over its implications.

January’s €20.346bn APP increase comes after €15.408bn in December – which included a holiday-driven break – and €24.096bn in November, the first month of the restarted programme, with the average monthly total of €19.950bn within a whisker of the €20bn target.

Alongside CBPP3’s 18.1% share of January’s APP increase, the corporate sector purchase programme (CSPP) contributed 22.7%, the asset-backed securities purchase programme (ABSPP) minus 1.4%, and the public sector purchase programme (PSPP) 60.6%. Private sector programme purchases hence contributed 39.4% of the January APP increase.

Joost Beaumont, senior fixed income strategist, ABN Amro, said the rise in CBPP3’s share from 5.6% in December was mainly driven by heavy covered bond supply in January.

He said the PSPP’s share is in line with the view that the ECB is shifting its focus away from the public sector and towards the private sector programmes.

“It has reduced purchases of government bonds and SSAs,” he said. “This should continue to provide significant support for the covered bond market, keeping spreads compressed.”

LBBW senior investment analyst Karsten Rühlmannn echoed the view that the ECB is shifting the weighting of the different programmes.

“Current monthly data on CBPP3 indicate that covered bond purchases may account for a somewhat larger slice of the overall APP than we originally thought,” he said.

CBPP3 could now constitute 10%-15% of APP net purchases rather than 8%-10%, he added, implying €2bn-€3bn of net purchases per month. Factoring in €33bn of 2020 reinvestments, this implies gross purchases of €57bn-€69bn, which Rühlmannn noted is a significant increase over the €42bn of the last full year of net purchases, 2018.

CBPP3 as a share of APP net purchases

Sources: ECB, LBBW

However, Rühlmannn noted that the Eurosystem could be taking advantage of the seasonal supply to frontload covered bond purchases ahead of redemptions later in the year.

And Maureen Schuller, head of financials research, ING, said CBPP3’s 18.1% January share could not be taken as any real indication of the ECB’s future purchase patterns, given the exceptionally high level of issuance.

“This most likely will be an isolated month,” she said, “simply because so many bonds were brought to the market in January.”

Schuller said that as primary activity slows down from February onward, CBPP3’s share will be more in line with the 10.2% seen in November. She added that the average central bank and SSA allocations for new issues in January dropped slightly from the final month of last year, indicating that the Eurosystem is less active or not pushing for higher allocations.

“We probably have to wait for further figures to arise for February purchases,” she said, “when primary activity is slowing down, but my expectation is that we will not see these numbers persist.”

Since net purchases restarted in November, the APP portfolio has, according to European Central Bank figures, increased €52.911bn – less than the total of the three months cited above – due to the inclusion of quarter-end amortisation adjustments and redemption of coupon STRIPS of €6.942bn.