The Eurosystem maintained heavy buying across APP and PEPP in their third combined week, with aggregate average daily gross purchases down only 7% on the first week. CBPP3 gross purchases increased some €423m on the back of the highest primary settlements in two months.

According to data released by the European Central Bank on Monday relating to settled and outstanding purchases under its various programmes, the PEPP portfolio grew €19.966bn in the week to last Friday (17 April), €589m less than a €20.555bn increase for the previous week. Gross APP purchases were €16.047bn, taking into account redemption figures released yesterday (Tuesday) afternoon, bringing aggregate Eurosystem purchases to €36.013bn.

Daily average daily gross purchases of around €9.003bn across the two programmes were down only around 3% from €9.326bn for the previous week, and around 7% from the €9.706bn of the week PEPP was activated. The past two weeks’ figures reflect only four days of settlements due to Target2 holidays on 10 and 13 April. Last week’s aggregate total gross purchases of €36.013bn compares with €37.305bn for the previous week and €48.531bn for the first week of PEPP.

Last week’s net APP increase was just €547m, down massively from €16.250bn, primarily due to a sharp increase in PSPP redemptions, which were around €14.6bn.

Gross CBPP3 purchases were around €1.715bn for the week, up around €426m, while the net CBPP3 increase was €1.515bn, up €326m, even if redemptions were €100m higher.

A total of €3bn of eligible new euro benchmarks settled during the week, the highest amount since the week of February 14, before financial markets were struck by the Covid-19 pandemic.

The full extent of Eurosystem covered bond purchases is unknown as it only reports an aggregate number for PEPP on a weekly basis rather than a breakdown of asset classes as under APP.

Florian Eichert, head of covered bond and SSA research, Crédit Agricole, said the CBPP3 purchases for last week were essentially business as usual.

“There was a bit more primary buying because of two big settlements from Crédit Agricole and CFF, which pushed it up a little,” he said. “But daily gross secondary purchases were more or less unchanged, a little over €200m a day.

“So it’s pretty much steady as she goes.”

The ECB is reported to be discussing possible changes to its range of crisis-response measures today (Wednesday), while its next governing council meeting is scheduled for Thursday of next week (30 April). The EU will meanwhile hold a summit tomorrow (Thursday).

Joost Beaumont, senior fixed income strategist, ABN Amro, said that – based on comments from ECB officials such as president Christine Lagarde and executive board member Isabel Schnabel, as well as broader developments – ABN Amro expects the central bank to increase PEPP by some €500bn – two-thirds of the initial €750bn size – as early as later this month.

This will first and foremost support the government bond market, according to Beaumont, although it will ultimately also prove spread-supportive for covered bonds.

“The €750bn was a huge bazooka,” he said, “but the impact so far has actually remained quite limited in getting rates down.

“The financials conditions index in the Eurozone has actually eased a little bit since PEPP was announced, but it has started to re-tighten again. The oil story is not helping, and with all the crisis measures being implemented, governments need to issue more debt – around €700bn – so the ECB needs to be there to absorb at least part of that.”