LCH.Clearnet punishes Italy’s and Spain’s fiscal adjustments, markets beg to differ

The Spanish minister of Economy Luis de Guindos’ visits to London earlier this month and to Washington on Friday have borne fruit. Yield of 10-year Spanish sovereign bonds have softly fallen back to the 5pc region (it was 5.6pc), while the CDS spread in comparison to German bonds has tighten and is now 316bp from 380pb last week.

The Italian 10-year bond has also behaved in a positive way, with a 5.4pc yield from 5.93pc it registered last January.

Nevertheless, according to analysts at Santander, Italy’s, Spain’s and Belgium’s spreads behaved the worst on Thursday after LCH.Clearnet announced an increase in the bonds’ margin that are used as collateral. From this moment on, the discount in Spanish bonds with a maturity between 7 and 11 years will stand at 8% (compared to 6% applied now), while in Italian’s will be at 8% as well (against previous 6,5%) and in Belgium’s at 5,5% (compared to previous 4,25%).

So LCH.Clearnet and the markets have apparently gone in two very different directions.

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