Monday 5 December 2016

Investors becoming nervy about Spanish break-up

Charles Penty

Published 18/08/2015 | 02:30

A recent pro-independence rally held in Barcelona
A recent pro-independence rally held in Barcelona

Catalonia's determination to gauge support for independence from Spain at the ballot box is unnerving investors as they weigh the cost of a possible breakaway by the country's biggest regional economy.

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Catalan bonds due in February 2020 have fallen, pushing the yield up this month to its highest level since early 2014 compared with that of similar-maturity German bonds.

In the same way, Spain's government-debt yield rose versus Italy's. That reflects greater economic risks from the region's September 27 vote and from national elections due by year-end, said Borja Gomez, director of analysis at Madrid-based brokerage Inverseguros.

The decision by Catalan President Artur Mas to call the vote sets up a new clash with the central government of Prime Minister Mariano Rajoy. Mas has framed the process as a black-and-white decision on whether the €198bn economy can go it alone as a nation.

"It's pretty obvious that the political situation over Catalonia has deteriorated quite significantly," said Cesar Molinas, a former head of European fixed-income strategy at Merrill Lynch & Co. The Catalan challenge revives concern by investors in getting future payments from the region's bonds if its confrontation with Madrid escalates. (Bloomberg)

Irish Independent

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