Catalonia Has ‘No Option But To Proclaim New Republic’ Yet Markets Shrug It Off

“Independence” is not priced into the markets right now, but we will know soon enough if a black swan is swooping in. Here’s the latest developments…

From Catalan News:

The Catalan Parliament will meet tomorrow, as well as on Friday, the very day that the Spanish Senate will vote on Article 155, potentially implementing the suspension of self-rule in Catalonia. The chamber could decide to strip Catalonia of its autonomy without the presence of the Catalan president Carles Puigdemont, who today declined an invitation to defend his case in the Senate. In fact, it was not clear whether he could do much to stop the intervention from happening. The main parties in Spain don’t agree on whether calling a snap election would avoid intervention in Catalonia – and in any case, the Spanish socialists could not stop it from happening. This is because the People’s Party has an overall majority in the chamber.

From Zero Hedge:

Update: Just hours after Puigdemont snubbed Madrid, canceling his visit to The Senate to discuss their imposition of Article 155, Catalan Deputy First Minister Oriol Junqueras told AP that the Spanish government had left Catalonia “no other option” but to proclaim a new republic.

Mr. Junqueras told the AP he was commenting as leader of his party, Republican Catalan Left, not as a member of the regional government.

Additionally, Puigdemont posted a defiant Instagram message: “We will not lose time with those who have already decided to crush Catalan self-government. Onwards!”


The situation is escalating quickly.

As we detailed earlier, in a sudden, and perhaps ominous, last minute change, the First Minister of Catalonia, Carles Puigdemont, will now not travel to Madrid on Thursday evening to appear before the Senate, and has brought forward the Catalan Parliament plenary session to vote on a response to Madrid’s application of Article 155.

And by the looks of Spanish bonds, it is not priced into the markets:

Does Spain matter?

If it does, we are about to find out before the end of the week.

Last week not much was done, and one has to wonder if the lack of action since October 1st had to do with the fact that the LBMA was holding their conference in Barcelona last week. Recall that Barcelona is in Catalonia.

Teresa May is publicly supporting Spain, and London surely didn’t want any mishaps including the potential to be thrust onto the world stage, especially when it is concerned so much about the gold market:

One of the most significant areas of work that LBMA has been involved in has been lobbying efforts in response to Basel III’s proposed provisions on the Net Stable  funding Ratio (NSFR) requirements. LBMA has instructed Norton Rose Fulbright LLP (NRFLLP) to lead the LBMA lobbying efforts in Europe.

Together, LBMA and NRFLLP have met with a number of LBMA members and drafted a position paper to send to key stakeholders, which summarises the impact that NSFR would have on the market and presents proposals to address the issues. NSFR provisions are expected to become applicable two years after adoption and therefore are expected to be
adopted in Q3 2020.

In summary the position paper outlines that the proposed higher haircut would have a substantial detrimental impact on London Precious Metals Clearing Limited (LPMCL), which would need to reconsider providing the settlement service.

The NSFR proposal will have a negative impact on the wholesale trading of precious metals, both in terms of the higher cost and the likely reduced liquidity in the market. The main thrust of the proposal is that the authorities consider carving out short- term lending in the wholesale precious metals markets as well as exempting the LPMCL model from the rules, therefore helping to mitigate the potential unintended consequences.

Stack accordingly…