Spain Debt Outlook Bearish With Short or Hedging Warranted: JPM
Alert: HALISTER1
Source: BFW (Bloomberg First Word)
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UUID: 7947283
(Bloomberg) -- Spain’s constitutional crisis over separatism in its Catalonia region is viewed with some complacency by investors when instead they should consider taking bearish positions, JPMorgan analysts say in note.
- Recommends tactical hedges in Spanish credit
- Weak sentiment may increase spread of Spanish corporate debt 10bps-15bps in near term, in universe of issuers that included Gas Natural, Repsol, Iberdrola
- With Catalonia comprising about one-fifth of Spain’s economy, disruption from general strike or civil disobedience may affect companies
- While crisis may get worse before it improves, doesn’t generate “systemic risk” to European credit
- JPMorgan rates team recommends shorting 10-year Spanish govt bonds versus Portugal’s and Germany’s
- NOTE: Catalan Police Endure Spanish Pressure Before Disputed Vote (1)
- Should Catalan parliament attempt to declare unilateral succession from Spain, central government “would have no other option” but to suspend the region’s administration
- Measures taken so far by central government to quash independence referendum planned for Oct. 1 “threaten to inflame the situation”
- Therefore either of two “unpalatable outcomes” now more likely: vote is canceled; or referendum goes ahead with low voter turnout rate due to disruption, resulting in a “yes to independence” result
Alert: HALISTER1
Source: BFW (Bloomberg First Word)
To de-activate this alert, click here
To modify this alert, click here
UUID: 7947283