* Catalan leader due to address parliament at 1600 GMT
* Could ask for independence declaration
* Yields nudge away from low visited on Monday
By John Geddie
LONDON, Oct 10 (Reuters) - Spanish government bond yields held above one-week lows on Tuesday as investors awaited a speech from Catalonia’s secessionist leader in which he could ask the regional government to declare independence.
Yields, which move inversely to prices, have fallen over the last couple of trading sessions on hopes that economic and political pressures may temper Carles Puigdemont’s address to the Catalan parliament at 6 p.m. (1600 GMT).
But yields on benchmark 10-year bonds were a touch higher on Tuesday, with some investors preparing for a unilateral declaration which Madrid has vowed to respond to immediately.
At 1.68 percent at 0800GMT, yields remained some distance from six-month highs of 1.81 percent hit last week in the wake of the illegal referendum that was marred by a violent police crackdown, but were off Monday’s low of 1.64 percent.
“It seems that the most likely path forward is one of escalation by the separatists with a declaration of independence this week,” said Apolline Menut, an economist at Barclays.
One of the options at Madrid’s disposal is to trigger Article 155 of the constitution, which allows central government to take control of devolved powers.
Analysts said such a move was a ‘nuclear option’ that would enflame tensions, and could further taint the reputation of Prime Minister Mariano Rajoy who leads a minority government.
Spain’s 10-year bond yield rose as much as 3 basis points on Tuesday to nudge just above 1.70 percent in early trading, while German equivalents flatlined at 0.45 percent .
Alexander Aldinger, a strategist with BayernLB, said the risk premium on Spanish bonds could climb back to “at least” last week’s level and the gap between German and Spanish yields could be “significantly higher”.
In a sign of concerns on the ground, some Catalan savers were shifting their bank accounts to lenders and braches in other regions of Spain on Monday. A number of Catalan firms have also decided to relocate their offices out of the region.
Elsewhere, National Bank of Greece is selling Greece’s first bank bond in the public market since 2014, another crucial step in the country’s bid to re-establish financial independence.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
Editing by Raissa Kasolowsky