Spanish Bonds, Stocks Fall Ahead of Statement by Catalan Leader

(Bloomberg) -- Spanish bonds and stocks slumped to multi-month lows as fallout from the Catalonian referendum continued to reverberate around markets.

The yield on benchmark 10-year notes rose to the highest in almost three months, while the nation's stocks fell the most in Europe on news that Catalonia's leader Carles Puigdemont would release a statement at 9 p.m. CET. Spanish Premier Mariano Rajoy has said his government won't acknowledge any move toward independence by the region.

The developments threaten to mar favorable economic data for the country, with services data on Wednesday coming in better than forecast. The repercussions are already being felt, with drugmaker Oryzon Genomics SA becoming the first listed company to announce that it is moving out of Catalonia.

The move in bonds “seems related” to that call, said Antoine Bouvet, an interest-rate strategist at Mizuho International Plc. “As far as market reaction is concerned the short-term effect is that investors would be reluctant to hold Spanish exposure ahead of this event risk.”

Spanish 10-year yields climbed five basis points to 1.77 percent as of 10:08 a.m. in London, the highest since July 14. While the euro held its gains to trade 0.1 percent higher at $1.1755, Spain's IBEX 35 Index slumped 2 percent.

Sunday's referendum has pushed up the risk premium on Spanish debt. The extra yield that investors seek to hold the nation's bonds over comparable German securities widened 17 basis points to 131 basis points this week.

The vote took many in the market by surprise, triggering a sell-off in Spanish debt as long positions were closed off. The situation threatens to deteriorate further with both sides seemingly unwilling to back down.

Spain has bond auctions scheduled Thursday, which will help gauge investor appetite for the securities.

--With assistance from Samuel Potter

To contact the reporter on this story: John Ainger in London at jainger@bloomberg.net.

To contact the editors responsible for this story: Jenny Paris at jparis20@bloomberg.net, Ven Ram, Charles Penty