CBPP3 buying remained close to its PEPP-era rate last week, with gross purchases coming in close to their three-month average, although there were signs of a Eurosystem summer slowdown in its wider QE activity, as purchases under the pandemic emergency programme hit a weekly low.

Settled and outstanding purchases under the European Central Bank’s third covered bond purchase programme (CBPP3) increased €889m, as the portfolio grew from €284.055bn to €284.944bn in the week to last Friday. Redemptions amounted to some €0.3bn last week, meaning gross purchases were €1.189bn.

This is close to the €1.144bn average weekly gross CBPP3 purchases from the time PEPP was launched in March until the week before last, during which time the €120bn additional APP envelope has also been running.

Two new eligible euro benchmarks totalling €1bn settled last week, a €500m eight year Berlin Hyp green Pfandbrief and a €500m 10 year NN Bank soft bullet debut. Central banks and official institutions were allocated 18% (€90m) of the Dutch deal and 25% (€125m) of the German, although these figures do not necessarily reflect CBPP3’s share – Crédit Agricole CIB analysts estimate the Eurosystem was allocated an aggregate €95m.

APP grew €7.561bn net and €14.761bn gross, while PEPP recorded its lowest week’s growth in both net and gross terms, with €17.506bn and €20.006bn of purchases, respectively.

“Purchases of just €3.3bn via PSPP and €17.5bn via PEPP, its lowest on record, suggest that the ECB is already slowing purchases as usual into summer,” said ING analysts.

In the early years of QE, the Eurosystem flagged front and backloading of its purchases around summer and winter market slowdowns, but more recently has refrained from doing so.

As widely anticipated, no changes to the central bank’s monetary policy were announced today (Thursday) when it held its latest governing council meeting and press conference. Some analysts nevertheless noted that ECB president Christine Lagarde stressed that the central bank would probably fully utilise the planned PEPP purchase volume of €1.350tr.

“In doing so, the ECB chief is sending a ‘dovish’ signal and opposing council representatives who recently speculated that the PEPP framework would not be fully utilised,” said DZ Bank analyst Christian Reicherter.

Photo: Martin Lamberts/ECB/Flickr