1.2 WAS THE ECB COVERED BOND PURCHASE PROGRAMME A SUCCESS?

Opening key fact:

The ECB disclosed daily the purchase volume under its programme. In addition, monthly reports on the purchases were published disclosing the amount purchased in the primary and secondary market. However, the ECB did not disclose any additional information regarding the breakdown by currency or country, not even in the final report. We only know that "in total, 422 different bonds were purchased, 27% in the primary market and the remaining 73% in the secondary market. The Eurosystem mainly purchased covered bonds with maturities of three to seven years, which resulted in an average modified duration of 4.12 for the portfolio, as of June 2010". We also know that the "Eurosystem intends to hold the purchased covered bonds until maturity".

The paper assumes that the €60bn were allotted as per national bank capital holdings in the ECB, which would give the Bundesbank practically a quarter.

The Conclusion states that the programme did a lot for the covered bond market. But:

The only caveat has been the domestic bias of the purchases by the national central banks which based on the flow we saw and other anecdotal evidence bought primarily paper from issuers out of their own countries. Hence, the German, French and Italian issuers benefited isproportionally whilst the Greek, Spanish and Portuguese markets, despite having arguably the highest needs, received less support due to their lower outstanding covered bond volumes.