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Citi: nothing ‘plausible’ about Scottish independence

by Dylan Lobo on Mar 10, 2014 at 14:21

Citi: nothing ‘plausible’ about Scottish independence

The debate on Scottish independence has really got our readers going.

The comments have been flying in, with Friday’s revelation that Alliance Trust was building a London base sparking fresh reaction.

‘I don’t have a problem if Scotland want independence, that is their right,’ said one reader. ‘It WILL happen sometime in the future, and as fair as I’m concerned the sooner the better.’

‘Most Scots don’t have a problem with the English as all…[They have] a problem with Westminster,’ another said.

Ahead of September's referendum, the pro-independence brigade currently sits in the minority at 35% with 53% against.

Citi has now weighed into the debate. The investment bank said it would be a big mistake if Scotland votes for independence, warning it would lose its AAA-rating.

‘There is nothing inherently plausible about a country with Scotland’s population and economy being independent,' Citi said in a detailed note on the country.

Bond uncertainty

For Citi there still remain too many uncertainties on the pricing of Scottish government bonds issued in the event of independence.

It is certain Scottish debt would trade at a higher yield than gilts in reflection of their relative liquidity and credit risk.  

‘It is unlikely, in our view, that Scotland would be given the top AAA-rating, but highly likely that it would be investment grade,’ Citi said.

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