Spanish and Irish paths diverge

Spain and its banking sector continue to be the centre of attention. Bankers widely believe that a restructuring drawing on the existing European bail-out fund is the only credible solution — but despite no sign of this happening, sentiment has improved. After heavy selling, better Cédulas buying emerged on Wednesday, particularly for strong single names. Yet, with Spanish banks facing around €200bn of Cédulas redemptions until the end of 2015, the sustainability of the bank sector and longer-term outlook for spreads, remains in doubt. By contrast, Irish bonds look set to perform.