Spain’s risk compared to Portugal worsens due to political impasse

Spain’s risk vis-à-vis Portugal is worsening this morning in international markets, with investors’ perceptions of the Spanish nation being negatively affected by the outcome of Sunday’s elections.

The differential between the interest rates on the Spanish ten-year debt and the Portuguese debt is increasing this morning to 8.0 points. The difference between the two countries has never been so pronounced, showing that investors take a greater risk in holding Spanish bonds than Portuguese bonds.

Interest rates on Spanish 10-year bonds are rising by almost five basis points, with the rate trading at 0.417%, according to Reuters. Meanwhile, the Portuguese rate is at 0.337%, up 4.3 basis points this morning.

Pedro Sanchez’s PSOE once again won the elections, but without a majority, and the political stalemate in Spain continued, with a strengthening of the extreme right. The socialists had 28 per cent of the votes and 120 deputies elected, followed by the People’s Party, which won 20.82 per cent of the votes and elected 88 deputies. In these elections, Ciudadanos was overtaken by the extreme-right Vox party, which had 24 deputies and is expected to elect 52, the extreme-left Podemos party, which has gone from the current 42 to 35 deputies, and by the Catalan separatists (ERC), which has fallen to 13 elected deputies (had 15).