The CBPP3 portfolio increased €769m in the first full week of trading activity this year, the most since November, as the first eligible supply of 2020 began to settle. Gross purchases are expected to rise further on the back of a pick-up in issuance, but redemptions are also set to increase sharply.

According to data released by the European Central Bank on Monday relating to settled and outstanding purchases under its various programmes on Monday, the CBPP3 portfolio grew €769m in the week to last Friday, from €287.759bn to €288.528bn. This is the highest weekly net increase since the week ending 20 November.

Given there were around €300m of CBPP3 redemptions, gross purchases amounted to €1.069bn, the highest weekly gross purchases since the week ending 27 November, before primary market activity ceased until the new year.

A €500m seven year mortgage Pfandbrief from Aareal Bank that opened euro benchmark issuance for 2021 on 5 January was the only CBPP3-eligible supply to settle last week. Central banks and official institutions were allocated 29% (€145m) and Crédit Agricole analysts estimated €115m of this was for CBPP3. This implies gross purchases of €954m were made in the secondary market, with the daily average rate of €191m close to the average for 2020.

Joost Beaumont, senior fixed income strategist, ABN Amro, noted that the €1.069bn of gross purchases is close to the weekly average of around €1.3bn that the Eurosystem bought in the second half of 2020.

“Looking forward,” he said, “we expect weekly purchases to rise next week, supported by more recent deals settling this week, while the Eurosystem will also need to reinvest large amounts of maturing principals.”

Four eligible euro benchmarks totalling €3.25bn settle this week, and at least €2.5bn more will settle the following week. The ECB expects €5.148bn of CBPP3 redemptions this month – the highest of any month this year – and only around €700m of that has been included in the past two weeks’ figures, meaning some €4.448bn of covered bond holdings are due to mature this week and next.