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LONDON, Sept 29 Spain's 10-year bond yield moved
away on Thursday from record lows hit this week, underperforming
its regional peers, as ructions in the Socialist Party renewed
concerns about political stability in the euro zone's
Senior Socialist Party members resigned en masse on
Wednesday in a bid to unseat their leader and break a political
impasse that has left the nation without a government all year.
News this week that the wealthy region of Catalonia will
hold a referendum on independence from Spain next year, whether
or not the central government in Madrid agrees to one, also
weighed on sentiment towards Spanish bonds, analysts said.
Spain's 10-year government bond yield rose 3 basis points
(bps) to about 0.93 percent and was just over 5
bps above Wednesday's all-time low at about 0.88 percent.
It underperformed its peers in the euro zone periphery,
which drew some support from a recovery in risk assets.
Portuguese bond yields fell 4 bps, while Italian
yields were about 2 bps higher.
As Spanish bonds came under selling pressure, the yield gap
between Italian and Spanish 10-year bonds narrowed to about 28
bps. It had moved out to about 31 bps this week - its widest
level since late 2014.
"With Spain being the laggard among the peripherals, it
appears that some increased political uncertainty is weighing on
the market," DZ Bank strategist, Christian Lenk, said.
"The removal of support for Socialist leader (Pedro) Sanchez
could pave the way for a new leader but it's far from certain,
on the other hand if he steps down that could increase the
possibility of the Socialists supporting a government led by
Rajoy," he said, referring to acting Prime Minister Mariano
(Reporting by Dhara Ranasinghe; Editing by Louise Ireland)