ECB Report on Covered Bond Purchases - October 2009

The European Central Bank's (ECB's) fourth monthly report on purchases made under its €60 billion (USD $89.192 billion) covered bond purchase program shows a total of €4.18 billion (USD $6.213 billion) bought from October 5 to October 30, 2009.  Of that amount, €1.294 billion reflected purchases in the primary market and €2.886 billion in the secondary market.  Primary market purchases thus comprised a higher percentage of the month's total acquisitions — almost 31% — than was the case in September (21%).

The report notes that "In comparison to the previous month, the covered bond market consolidated in October, which was reflected in both primary and secondary markets."

The report also states in part (italics added):

Graph from ECB reportAlthough activity in the primary market continued unabated in several euro area countries (Italy, Spain, Germany, France, Portugal and the Netherlands), in aggregate there were fewer new issuances and the degree of oversubscription of order books has moderated relative to September. While inaugural bonds still generated strong demand, a few deals from traditional issuers came out at the lower end of the indicated issuance size or were priced at a somewhat wider spread than initially foreseen.

In the secondary market, bid-offer spreads remained at fairly wide levels. Trading activities were reported to be driven by the reshuffling of portfolios reflecting investors' perceptions on relative prices of different covered bonds. Overall, covered bond spreads traded in a narrow range during the period under review. The market was still digesting the heavy supply of covered bonds from September, and some investors also appeared to take profits on several previous positions. While some recently issued covered bonds are trading at wider spreads in the secondary market compared with those at issuance, spreads stabilised in almost all euro area countries, with a tendency to converge across the various segments of the covered bond market.

In addition, the ECB report points out that spreads for senior unsecured continued tightening last month, "[i]n contrast to the stabilisation" of covered bond spreads.

This official update, released November 5, is a single page of text with a graph showing spreads since the ECB's purchase program began.  There is also a page of definitions.

To download a PDF of "Monthly Report on the Eurosystem's Covered Bond Purchase Programme: September 2009," click on "Oct ECB CB Report" under Attachment, below.