… but ECB covered bond buying scheme dead on arrival as supply slumps

ECB new building 2014 dawn
By Bill Thornhill
23 Oct 2014

The European Central Bank is estimated to have bought well over €1bn, and possibly close to €2bn, in the first week of its third covered bond purchase programme (CBPP3) and traders have reported a tripling of flows. But limited dealer inventories are finite and issuance prospects mean it can only be a matter of time before the programme peters out, writes Bill Thornhill.

With even the biggest 10 liquidity providers in the Street only able to hold about €2bn of covered bond inventory, and with reduced funding needs clipping primary flow, the ECB’s strategy of buying in secondary markets looks doomed in terms of the size it can achieve and therefore ...

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