###POV. The Catalonian vote set for Oct 1.....>

SPAIN: ###POV. The Catalonian vote set for Oct 1 may or may not go ahead. It is

already deemed unconstitutional by the Spanish Constitutional Court. There is no

majority in favour for Catalan independence according to the polls and relative

to 12 months ago support for independence has waned.

- If the referendum goes ahead, it is likely that the pro-independent voters win

but turnout should be low. The referendum is unlikely to be a basis for Catalan

independence but fresh regional elections are likely. 

- We merely wanted a guide as to how much the Catalan premium is for the Bonos.

- Political risks have bitten French, Italian and Spanish debt markets this year

but generally the 10Y spreads between these 3 credits and Germany co-integrate

nicely. We ran a regression of Spanish spreads against Bund-BTP, Bund-OAT and

added SPGB-Catalan spreads (2018 maturity). If we assume that the SPGB-Cat

spreads go back to their H1 average, we find the Bund-Bonos spread would drop

15bp. 

- This 15bp is a first-guess of what Catalan risks have done to the Bonos.