Live Markets: Ignore politics and buy the dip in Spain's Bonos

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06/10/2026 10:35

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IGNORE POLITICS AND BUY THE DIP IN SPAIN’S BONOs
Spanish government bonds were definitely well-behaved after Prime Minister Pedro Sanchez called an early election for Nov. 29 in a bid to strengthen his mandate. 
According to Morgan Stanley, Spain remains an attractive option in euro area fixed income, with political uncertainty unlikely to introduce enough variability in macroeconomic outcomes to challenge the country’s image of stability.
“Looking ahead, we see scope for further positive rating developments in 2027,” it says, arguing it would view any idiosyncratic cheapening in Spain government bonds as an opportunity to add exposure.
Idiosyncratic cheapening means a rise in Spanish government bond yields caused by Spain-specific factors rather than broader euro zone market moves.
“While gross issuance is set to rise in 2027, we expect net issuance to remain broadly stable, with non-euro-area investors and banks continuing to play a key role in absorbing Spanish government bond supply.”
The yield gap of Spanish bonds versus safe-haven Bunds – a gauge of risk premium investors demand to hold Spanish debt – was at 62.50 bps, from 61 bps late Friday before Sanchez announcement.
(Stefano Rebaudo)
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