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Sovereign Concerns Back In The Frame

09 November 2015 by lberuti

Are we about to enter a period of renewed concerns about sovereigns? That was certainly what the market was trying to assess today. There was news over the week-end that Portugal could enter a period of uncertainty. Portugal’s socialist party approved a plan to join forces with three other left wing parties to oust Mr Coelho’s new administration. Whether this agreement could lead to a new coalition government is unknown, and how much could be given up to the Left Bloc and to the Communists is anybody’s guess. These mounting concerns led investors to send Portugal’s 5 year risk premium 26bps wider to 196bps. Despite recent polls showing a waning support for Podemos, thus reducing the probability of a “market unfriendly” outcome in the December’s election, Spain’s 5 year risk premium widened in sympathy and closed 3bps wider at 91.5bps