The European Central Bank's (ECB) new €40 billion ($55 billion) covered bond purchase program (CBPP2) kicked off yesterday with a €1 billion dual tap issuance from Credit Mutuel Arkea's program.

Standard & Poor's analysts said that these taps will bring the total volume of covered bonds under the Credit Mutuel Arkea's program over the €4 billion mark.

The ECB announced details of its new initiative late last week. It comes after a similar program that had central banks buying €60 billion of covered bonds in primary and secondary markets between mid-2009 and mid-2010.

The main differences incude that the minimum issue volume is now set at €300 million instead of €500 million as a rule, but in no case lower than €100 million.

Another change is that the minimum rating requirement is set at 'BBB-' from one major rating agency, and this will not only be required in exceptional cases.

The CBPP2 portfolio will also be available for lending through facilities offered by central securities depositories, or via matched repo deals. This was only offered at a later stage in the previous program, Royal Bank of Scotland analysts explained in a report.

However, market analysts said that the current market environment is considerably different for this second round of the ECB program.

This time around, the ECB has to reverse the underlying widening trend in covered bond spreads as opposed to the start of the first program when spreads had started to tighten, RBS analysts stated.

Furthermore, the ECB needs not only to ease the strains of the banking crisis, but also of the Eurozone's sovereign debt crisis.

"We are yet to notice any effect of the CBPP2 on secondary covered bond spreads or new issuance," Bank of America Merrill Lynch analysts stated in a report. "We believe that the overall market conditions are the key driver of covered bond spreads than the ECB purchase program now as they were a year and a half ago."

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