Catalan Independence Showdown Bodes Ill for Spanish Markets

Equities and fixed income show historical sensitivity to independence movement volatility.


Global market attention to Catalonia's independence referendum, scheduled for 1 October, has picked up as the Spanish government ramps up its efforts to thwart the vote. Since January of this year, spikes in our Macro Market Driver signal for Catalan Independence has an adverse effect on the IBEX 35: almost 90% of the time the index fell in value within three days of a spike, nearly 60% of the time within 10. Rates, on the other hand, show a more mixed relationship: 10-year yields tended to increase over a three-day holding period, while over 10 days they tended to fall. With confrontations between Madrid and Barcelona likely to only intensify over the coming days, expect Spanish equities to take a sustained hit, even if rates recover quickly.