Spain’s benchmark bond yields are inching up this afternoon as the country prepares for a crucial investiture vote on the re-election of prime minister Mariano Rajoy.

Spain’s 10-year bonds are up above the 1 per cent mark at publication time – their highest level in three weeks.

Yields have risen 6.3 basis points (0.063 percentage point) today as Mr Rajoy seeks parliamentary backing to form a minority government after Spain’s second general election of the year ended in another stalemate. The ruling Partido Popular party emerged as the largest in the country, but does not have enough seats to govern alone.

PP has teamed up with the liberal-leaning Citizens in a bid to form a workable government. Wednesday’s investiture vote however leaves the coalition six seats short for an absolute majority of 176 votes in the 350-seat parliament.

A result is due around 2000 BST. Should it be blocked, a further vote will be held on Friday, where the coalition would require a simple majority of 175.

If lawmakers fail to back Mr Rajoy, Spain could be heading for its third general election in 12 months in December.

“The most important thing is that the investiture votes set the clock ticking for a two-month deadline by which parties have to find an agreement to form a government before a third round of elections becomes inevitable”, said analysts at Citi.

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