Investors becoming nervy about Spanish break-up
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.
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)