Robeco: Catalan government faces vote of confidence after failed budget

Disappointing labor market data in the U.S., which could potentially delay FED hikes, and the dovish signals from the ECB contributed both to the rally. Italian bonds have returned 2.44% this year, Portuguese bonds -1.57%, Spanish bonds 3.39% and Irish bonds 2.93%.

Spain
On a reginal level, the Catalan budget was voted down by the junior coalition partner CUP. Given the small majority, support from the junior partner is required to keep the majority. As a result, the regional government will hold a vote of confidence in September.   

Italy
The Five Star Movement performed well in the local elections last Sunday. In Rome it even did win from the now running Democratic Party (PD) by a significant margin (10 pp). An absolute majority is not secured, therefore a second round is required which is scheduled for June 19. The outcome of the local elections are relevant, since it provides color on the popularity of the current government and PM Renzi chances to win the referendum on constitutional reform in October. Renzi made clear that he would resign if he would lose the referendum. 

Greece
Eurogroup and Germany approve payment of a tranche of EUR 7.5bn to Greece as it fulfilled the last requirements to receive the payment. With the payment Greece can pay back maturing bonds during the summer. With the approval to pay the tranche, it is also expected that the ECB will lift the restriction to use Greek debt as collateral for the ECB’s liquidity operations. Lifting the restriction would be a relief for Greek banks as they will get access to cheaper funding.

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