‘Triple-Digit Club’: Spanish Stocks, Bonds Slide, Spread To Bunds Hits 100bps As Rajoy Faces No-Confidence Vote

Oh, good. More political turmoil in Europe.

If you’re the ECB and you’re aiming to try and tweak the forward guidance on APP to tip a September wind down, just about the last thing you need is more problems in the periphery, but it looks like trouble’s a’ brewin’ in Spain where Ciudadanos is all set to back a no-confidence vote against Rajoy, just a day after he managed to get a budget passed.

Jose Manuel Villegas, the party’s secretary general, made the announcement on Friday, in a televised address, citing corruption which he says “has meant the government has become weak, useless and unsustainable.”

Tell us what you really think, Jose.

“We need a strong and legitimate government so we think it’s time for a democratic solution, to give the Spanish a voice and call elections,” he continued. “If Mr. Rajoy refuses to call elections and digs in and remains in his usual paralysis, we would be willing to promote and back a no-confidence motion.”

So there’s that and it comes as the Catalonia situation is still in fresh in the market’s mind.

Needless to say, Spanish bonds were immediately sold:


That means spreads to bunds are now in the triple-digits, just as the BTP-bund spread blows about beyond 200bps.


And the IBEX was immediately hit on the news as well:


And so, Mario Draghi has a fresh headache headed into the weekend.

The problem, again, is that even if the deceleration in the eurozone economy was in fact “transitory”, rolling back APP in the face of periphery spread widening is a recipe for, well, for more periphery spread widening.

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3 thoughts on “‘Triple-Digit Club’: Spanish Stocks, Bonds Slide, Spread To Bunds Hits 100bps As Rajoy Faces No-Confidence Vote

  1. This vote of no-confidence is a consequence of the most recent ruling regarding a massive corruption scandal which started back in 1989 known as Gurtel case. Current spanish prime minister Mariano Rajoy was found as a “non-reliable source” when he was forced to testify.

    Sometimes the market just reacts without considering what has really happened.

    IMHO removing a party found guilty of large scale corruption, money laundering and fraud out of power should never be bad news for markets or risk premia.

  2. Ciudanos does not back the no-confidence vote, as it the socialist party that wants to govern, presumably with direct and/or indirect aid of Podemos and the various nationalist parties. Ciudanos wants elections.

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