LONDON Spanish stocks and bonds fell on Monday after separatist parties in Catalonia won a majority in regional elections but the need to form alliances to push for independence from Spain meant losses were limited.
The Convergence and Union alliance (CiU) is leading the campaign to separate wealthy Catalonia from Spain, remained the biggest party in the regional parliament, but its presence dropped to 50 seats from 62, and leader Artur Mas said he would have to ally with another group to govern.
Together, four different separatist parties including CiU, won just shy of two thirds of the regional parliament, just about what they had before.
Spanish bond prices fell, pushing 10-year borrowing costs up 3 basis points to 5.67 percent with the cost of insuring against a Spanish default also slightly higher. The 10-year yields, however, remained well within a 5.54-6.02 trading range they have been confined to over the past month.
"The main political party that was pushing for independence lost seats in parliament ... so it may need to form a coalition with the other smaller parties. But it's not clear if they will be able to move on with a coalition that's why the market has not moved much," ING strategist Alessandro Giansanti said.
Spain's blue-chip IBEX was down 0.3 percent at 7,888.7 points on Monday, broadly in line with both Germany's DAX and Italy's FTSE MIB and outperforming France's CAC, which was down 0.7 percent.
The index rose 5.6 percent last week and is up around 31 percent since European Central Bank President Mario Draghi pledged to defend the euro, in late July.
"Yes, pro-independence parties have taken a majority, but we're still some way away from anything like a real referendum," Mike van Dulken, head of research at Accendo Markets, said.
"Tensions may increase slightly between Catalonia and Madrid, but this is likely to be a long drawn out affair. We've not seen any large increases in flow compared to normal."
Traders said market reaction was tempered by growing investor expectations that Greece's international lenders would reach agreement later in the day to release more aid to the debt-stricken country.
Euro zone finance ministers and the International Monetary Fund meet in Brussels on Monday to discuss how to make Greece's towering debt levels more manageable, a necessary condition for the release of the country's latest aid payments.
(Editing by Giles Elgood)