Gross CBPP3 purchases continued to reflect the general summer slowdown last week, with aggregate APP and PEPP purchases also hitting a new low. However, the seasonal lull is expected to come to an end around the turn of the month.

Settled and outstanding purchases under the European Central Bank’s third covered bond purchase programme (CBPP3) rose €457m, as the portfolio grew from €284.697bn to €285.154bn in the week to last Friday. This is €276m less than a €733m net increase the previous week. Gross and net purchases were the same in the past two weeks in the absence of any redemptions.

Last week’s gross purchases are the lowest since the week-ending 1 May and €604m below the €1.061bn weekly average from the time PEPP was launched in late March until the week before last.

Until the week before last, gross purchases had fluctuated between €682m and €775m for four weeks, which DZ analysts highlighted is a notably reduced level versus an average of €1.3bn per week since the beginning of the year.

“In line with the overall market situation,” they said, “the ECB has also taken a more relaxed approach in recent weeks with the purchases under its third covered bond purchase programme.”

For the fifth consecutive week, no CBPP3-eligible supply settled amid a seasonal lull in primary market activity.

Maureen Schuller, head of financials research, ING, said it is difficult to draw any conclusions from the past five weeks of purchases given that APP activity has historically been reduced in this period.

“I don’t see any abnormal developments in the purchase activity,” she said, “but I am very curious to see what will happen after the final week of August.”

From the first week of September by the latest, gross CBPP3 purchases should probably return to the around €1bn a week range that has been typical for most of this year, according to Schuller.

“The €120bn additional APP envelope has not particularly impacted the ECB’s buying of covered bonds,” she said, “so I think we will go back to the purchasing pattern that we have seen earlier this year for CBPP3.

“As we have seen in the past,” she added, “order sizes for primary issues did not return to 50%, leaving space to also be active in the secondary market, although a pick-up in primary activity post-summer would definitely make it easier for the CBPP3 to find more bonds.”

Higher covered bond redemptions in H2 versus H1 will also aid gross covered bond buying, she said, noting that October is a particularly heavy month for redemptions.

Aggregate gross APP and PEPP purchases of €20.562bn were down €3.378bn from €24.264bn the previous week and are the lowest since PEPP purchases began in late March. Since the week ending 12 June, when they were €41.800bn, aggregate Eurosystem purchases have progressively fallen from one week to the next by an average of €2.129bn.

The APP portfolio grew €4.947bn last week, €2.704bn less than a €7.651bn increase registered the previous week. Given redemptions were around €100m, gross purchases were around €5.047bn – a new weekly low for APP since the PEPP programme was launched. Gross purchases under APP have shrunk sharply in the past three weeks, with last week’s figure less than half the €10.652bn of gross purchases in the week ending 24 July, for example.

Last week, the PEPP portfolio grew, rather than shrank, for the first time in three weeks, increasing €14.979bn, €1.166bn more than €13.813bn the previous week. Given around €500m of redemptions, gross purchases were €15.479bn, €1.034bn less than €16.513bn the previous week, and marking a new weekly gross purchase low for the programme.