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REFILE-GRAPHIC-Catalan bonds and stocks slump on referendum alarm
September 29, 2017 / 1:20 PM / in 21 days

REFILE-GRAPHIC-Catalan bonds and stocks slump on referendum alarm

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By Abhinav Ramnarayan and Helen Reid

LONDON, Sept 29 (Reuters) - Catalan bonds and stocks were finally showing signs of selling pressure as the region prepared to hold an independence referendum and Madrid said it would prevent it going ahead.

Broader bond markets have been unaffected, but assets more closely connected to the region have come under late pressure in the days leading up to the Sunday vote.

The gap between Catalan bonds maturing in February 2020 and the Spanish equivalent was close to its widest all year, at around 300 basis points.

Shares in Catalonia-headquartered banks Banco Sabadell and Caixabank have seesawed in recent weeks.

On Friday they fell in early trading, before recovering ground as Spain’s IBEX turned positive.

Spanish government bonds have been fairly resilient, their performance largely in line with Southern European and higher-rated peers, while there has been no hint of a flight-to-safety bid for German Bunds, traders said.

Catalan separatists have urged supporters to defy Spanish efforts to block the referendum, calling for peaceful turnouts at polling stations that police have been ordered to keep shut.

“At the moment, there is no significant market impact from the tensions, but if the Catalan police and the Spanish police are standing there in front of the polling stations and discussing whether to block the station or not, this will be an issue,” said DZ Bank strategist Sebastian Fellechner.

Editing by Andrew Roche

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