Spain: Politics remain at the centre stage – BBH

Analysts at BBH note that the tensions between Catalonia and Madrid remain intense as a declaration of independence would likely force Madrid to suspend the local government and govern the region directly.  

Key Quotes

“Many years ago, Montreal was the financial center of Canada, but the threat of Quebec secession saw a shift towards Toronto.  Already one of the large banks in Catalonia has raised this possibility in Spain.  The Constitutional Court suspended next week's the regional parliament session next week in Catalonia, where independence could be declared.”  

“Spanish assets continue to underperform.  Spain's 10-year yield is up nearly five basis points today to 1.73%, which is essentially the move for the week.  The premium over Germany widened this week to five-month highs near 130 bp.  Two months ago, Spain's premium was less than 100 bp.   Spain's bourse is off 2.2% this week, while the Dow Jones Stoxx 600 is up about 0.6% this week.  Moreover, the Spanish economy is doing well.  The strength in the recent PMI has been followed by a better than expected industrial output report.  The 1.0% rise in August snapped a two-month decline.  The median forecast from the Bloomberg survey was for a 0.2% gain.”