Spanish Debt

The market’s reaction to the poorly structured Spanish bank bailout was extremely worrying from a long-term perspective. When $100 billion doesn’t help the market stabilize, it’s clear that central planners have begun to lose control over this ultra-leveraged environment.

In past month, Spanish 10 year yields topped out at 7.285, blowing out massive spreads to comparable German bunds. It’s hard to imagine a catalyst for a bid to come into this market; The IMF has about $400 billion, the ESM/EFSF mechanisms are reeling from the bank bailout, and Germany seems to lack the political will to initiate any major action.  It’s no secret that yields above 7% are unsustainable.