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SPGBs Look Through Political Uncertainty, For Now

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Increased political uncertainty is having little impact on Spanish paper this morning.

  • SPGBs are little changed to a touch tighter vs. Bunds across the curve, although underperform BTPs.
  • A reminder that late Wednesday saw PM Sanchez reveal that he is considering his position amidst a corruption probe surrounding his wife.
  • The broader stabilisation in EGBs and Sanchez’s already marginalised political position perhaps explains the muted market reaction.
  • Other potential explainers:
  • The market may not believe that he is likely to step down on Monday, with confirmation of his departure required to generate a widening impulse for SPGBs. Subsequent government formation may prove tricky under another leader given the fractured nature of Spanish politics.
  • A continued focus on impending ECB easing.
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Increased political uncertainty is having little impact on Spanish paper this morning.

  • SPGBs are little changed to a touch tighter vs. Bunds across the curve, although underperform BTPs.
  • A reminder that late Wednesday saw PM Sanchez reveal that he is considering his position amidst a corruption probe surrounding his wife.
  • The broader stabilisation in EGBs and Sanchez’s already marginalised political position perhaps explains the muted market reaction.
  • Other potential explainers:
  • The market may not believe that he is likely to step down on Monday, with confirmation of his departure required to generate a widening impulse for SPGBs. Subsequent government formation may prove tricky under another leader given the fractured nature of Spanish politics.
  • A continued focus on impending ECB easing.