Euro Rates Watch – Spain’s political stalemate continues

by: Aline Schuiling , Kim Liu

  • Spain’s second general election in six months did not end the fragmentation of the political landscape
  • Mariano Rajoy’s Partido Popular won 14 seats and extended its lead over the other parties, but forming a stable coalition remains problematic…
  • … implying that new elections remain an option
  • Spain could be one of the first countries that will be fined by the European Commission for overshooting its deficit target
  • Despite the relief yield spread compression in the market, we expect that the political risk premium in Spanish government bonds is likely to persist
  • Spanish bonds will remain vulnerable during bouts of risk aversion
Euro-Watch-Spanish-election-27-June-2016-final-1.pdf (64 KB)

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