Spanish bonds dropped, pushing the 10-year yield to the highest in more than three weeks, amid speculation that caretaker Prime Minister Mariano Rajoy could face a confidence vote this month.
Spain’s securities led declines among euro-region sovereign debt. The country has been through two inconclusive elections since December and has repeatedly missed European Union targets to cut its budget deficit, which it’s unlikely to meet this year. Rajoy could undergo his first confidence vote on Oct. 28, Spanish paper El Mundo reported.
The nation’s bonds outperformed their Italian and Portuguese counterparts in the past month on the view that Spain’s political impasse was showing signs of easing. “The headlines bring political and fiscal risk back to the market,” said Marius Daheim, a senior rates strategist at SEB AB in Frankfurt.