Gross CBPP3 buying fell to Eu3.372bn in July, making it the second quietest month for the programme. The low was attributed to a summer drought rather than the ECB “taking its foot off the pedal” as secondary bids held up, and the APP meanwhile hit the Eu60bn per month mark.

ECB figures released yesterday (Monday) show the CBPP3 portfolio increased Eu2.472m in July, down from a net increase of Eu2.703m in June. Taking into account redemptions in the portfolio of around Eu900m last month, gross purchases totalled around Eu3.372bn, down from around Eu5.063bn in June.

Last December is the only month in which gross CBPP3 purchases were lower, at around Eu1.682bn.

Florian Eichert, head of covered bond and SSA research at Crédit Agricole, said the main reason for the drop was that only Eu800m of CBPP3-eligible supply settled in July, down from Eu2.5bn in June.

“As far as gross secondary market settlements are concerned, July’s number came in at roughly the same as June – Eu2.6bn,” he said. “Thus, we cannot really talk about the Eurosystem aggressively taking its foot off the pedal.

“At this point in the programme, as well as this time of year, it cannot just compensate for a drop in new issuance by this amount via additional secondary market buying. We are quite confident that, should issuance pick up again after the summer, CBPP3 settlements will move towards their recent Eu5bn average again.”

Some analysts had suggested that overall Eurosystem buying under the asset purchase programme (APP) could fall below the ECB’s Eu60bn monthly target in July, given lower issuance and liquidity in the summer period and with the ECB having bought around Eu62bn per month in previous months.

However, the overall asset purchase programme (APP) portfolio grew Eu60.434bn last month as public sector purchases were sustained. The public sector purchase programme (PSPP) contributed Eu51.875bn, up slightly from Eu51.607bn.

The ECB’s total holdings under the APP surpassed Eu2tr in July, including Eu225.103m of covered bonds as of the end of the month. When covered bond redemptions are taken into account, purchases under CBPP3 are approaching Eu250bn.

Bernd Volk, head of covered bond and SSA research at Deutsche Bank, said that a comparison of monthly net issuance of euro benchmark covered bonds from euro area banks with these gross CBPP3 purchases underlines the “extreme impact” of the programme for real investors.

“With aggregate negative net supply of euro benchmark covered bonds issued by euro area banks since the start of CBPP3 amounting to Eu63.5bn and ECB gross CBPP3 purchases amounting to Eu250bn, the total volume of euro benchmark covered bonds issued by euro area banks available for real investors declined by Eu313.5bn.

“While positive net supply by non-euro area banks of Eu37.5bn provided some relief, in our view, the crowding of investors is significant.”

In the week to last Friday, the CBPP3 portfolio grew Eu540m, from Eu225.040bn to Eu225.580bn. Portfolio redemption figures released this (Tuesday) afternoon show that no CBPP3 holdings matured last week.

Buying was slightly higher than the gross purchases of Eu408m in the previous week, which were the lowest in a full five day week since the programme began.

As no CBPP3-eligible benchmark supply settled last week, secondary market purchases averaged Eu108m per day, up from Eu81.6m per day in the previous week.