RPT-Scotland's "No" to independence boosts Spanish bond, stock markets
(Repeats to additional subscribers) * Scots spurn independence, Spanish yields fall sharply * Some analysts still see Catalonia a risk in the long run * Bund yields edge up as uncertainty over Scotland subsides By Marius Zaharia and Sudip Kar-Gupta LONDON, Sept 19 (Reuters) - Spanish bonds and stocks were Europe's top performers on Friday as markets viewed Scotland's vote against independence as diminishing prospects of a stronger push for secession in Catalonia. Scotland rejected independence in a historic vote that had threatened to rip the United Kingdom apart and bolster separatist movements elsewhere. here The most closely watched region within the euro zone was wealthy Catalonia in north-eastern Spain, which is planning an independence referendum of its own in November, albeit one that is not recognised by the Spanish government. The region accounts for a fifth of Spain's economic output and is a net contributor to the central budget. Separation would threaten Madrid's ability to repay its large debt pile. Spanish 10-year government bond yields fell 9 basis points to 2.19 percent, leading a drop in yields across the euro zone periphery. As the risk of a Scottish breakaway from the UK was perceived to be on the rise in the past two weeks, Spanish yields surged to as high as 2.40 percent from record lows of just above 2 percent. "There was some concern that if the "Yes" vote won, then a similar situation might develop in Catalonia," said Patrick Jacq, rate strategist at BNP Paribas. "So we're seeing a correction over the movement that we've seen over the past few weeks." Spain's IBEX stock index rose 1.2 percent at 11,121.3 points, outperforming its European peers. The pan-European FTSEurofirst 300 index gained 0.9 percent to 1410.13. German Bund futures were 16 ticks lower at 147.72 as some of the flows into top-rated assets triggered by the uncertainty surrounding the Scottish vote were unwound. Ten-year German yields were up 1.4 bps at 1.058 percent. "PRECEDENT" Some analysts doubted that Catalonia's push for a referendum would lose much steam after Scotland's vote. Commerzbank strategists recommended using any relief rally in Spanish bonds as an opportunity to reduce exposure "as the political risks in Spain likely won't go away before November". Jan von Gerich, chief fixed income analyst at Nordea, expected Spanish bonds to be "the biggest beneficiary" of the Scottish vote within the euro zone. "But there will still be focus on what's going on in Catalonia," he said. "It sets some kind of precedent that you can solve this type of problem with a referendum... I don't think this issue is going to go away just because Scotland voted 'No'." Michel Juvet, chief investment officer at Swiss bank Bordier, cautioned that European separatist movements could be encouraged by how Scotland had managed to secure pledges of new powers for its regional government. "The Scottish vote is helping the Spanish market, but the 'No' vote in Scotland does not mean the end of separatist movements," Juvet said. (Graphic by Monica Ulmanu, editing by John Stonestreet/Nigel Stephenson)
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