Spanish Bonds Drop With Italy’s as Elections, Brexit Vote Loom

  • Germany-Spain 10-year yield spread widens to most in two week
  • Surveys show more Britons planning to vote to leave EU

Government bonds from the euro region’s high-debt and -deficit nations declined relative to benchmark German bunds with the U.K.’s vote on its European Union membership and Spanish general elections both due this month.

Spain’s 10-year sovereign securities fell for the first time in three days after two surveys showed more Britons were planning to vote to leave the EU in a June 23 referendum than those wishing to remain. The extra yield, or spread, that investors get for holding Spanish 10-year debt instead of similar-maturity German bunds reached the widest in three weeks. Italian and Portuguese bonds also declined.

With the U.K. referendum and Spanish general elections approaching, this “should in general add some nervousness to the markets,” said Christian Lenk, a fixed-income strategist at DZ Bank AG in Frankfurt. “That’s helping to support stronger credits in the euro zone. It’s a pattern that is quite likely to continue in the upcoming days or weeks.”

Spain’s 10-year bond yield rose six basis points, or 0.06 percentage point, to 1.53 percent as of 4:07 p.m. London time, after falling three basis points in the previous two days. The 1.95 percent security due in April 2026 dropped 0.57, or 5.70 euros per 1,000-euro ($1,137) face amount, to 103.83. The yield on Italian debt due in June 2026 climbed six basis points to 1.48 percent.

Benchmark German 10-year bund yields added one basis point to 0.08 percent, after falling to 0.065 percent on June 3, the lowest since April 2015. The difference with similar-maturity Spanish bonds widened to as much as 145 basis points Monday, the most since May 17.

A YouGov poll for television network ITV found 45 percent of British voters would choose ‘Leave,’ compared with 41 percent picking ‘Remain.’ A separate survey by global market research company TNS showed 43 percent for ‘Leave’ and 41 percent for ‘Remain.’

Spain plans to hold elections on June 26 after the two parties that have taken turns leading the nation since the early 1980s failed to form a government following elections six months ago. A poll published Sunday showed acting Prime Minister Mariano Rajoy’s People’s Party is on track to win 31 percent of the vote, equivalent to 130 seats in the country’s 350-seat parliament.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE