The sound of bickering among Spanish politicians is being drowned out by Mario Draghi, at least when it comes to the bond market.
Spain’s election on Dec. 20 ended a four-year majority for Prime Minister Mariano Rajoy and left a deadlock over who will form the next government as parliament reconvenes this week. The European Central Bank’s bond purchase program, known as quantitative easing, is buying politicians time as they argue over who should run the euro region’s fourth-biggest economy. The yield on 10-year bonds compared with German bunds has risen just six basis points since the vote.
“Spanish politics are not really driving the bond market for the time being,” said Mark Dowding, who helps manage about $60 billion as a partner at BlueBay Asset Management LLP in London. Bonds “should not be materially impacted when the greater backdrop is ultra-low euro-zone bond yields and QE purchases from the ECB.”
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