Only a net €2bn of covered bonds bought under PEPP
In brief: Only a net €2.099bn of covered bond purchases were registered under PEPP from its launch until the end of May, according to the first breakdown by asset class, released this (Tuesday) afternoon, a far lower amount than many market participants had forecast.
Just 0.9% of the €234.665bn of net PEPP purchases were of covered bonds, with the vast majority, 79.5%, being public sector debt. The biggest deviation from the capital key that guides APP purchases was of Italian debt.
The cumulative €2.099bn of net covered bond purchases under the PEPP over more than two months compares with an average net increase of around €875m per week for CBPP3 over a similar period.
Some market participants had suggested that CBPP3 purchases were being topped up significantly by buying of covered bonds under PEPP, with one having suggested that as much as €75bn of additional covered bond purchases could be conducted under the new €750bn programme this year. However, should the past two months’ rate be maintained until year-end, net covered bond purchases would total only around €9bn.
“For PEPP, I had expected a much higher number,” said a covered bond analyst. “Overall, the figures show that Eurosystem provided support to markets that needed it the most.”
We will bring you more analysis of and reaction to the PEPP breakdown tomorrow.
Changes in holdings in EUR millions Asset-backed securities Covered bonds Corporate bonds Commercial paper Public sector securities Total
Net purchases March-May 2020 0 2,099 10,579 35,384 186,603 234,665
Share of PEPP 0% 0.9% 4.5% 15.1% 79.5%
Source: ECB
