Spanish Bond Market Paying More Attention to QE than Politics

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.”

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza