Spanish Default Risk Soars to Record on Bets Bailout Is Looming

Spanish debt risk climbed to a record for a second day and signalled a 37 percent chance the nation will default as its borrowing costs surged to levels that prompted its neighbors to seek bailouts, Bloomberg reported. Spain is due to sell new debt Tuesday before European officials travel to Washington later this week to seek a bigger war chest to battle the financial crisis. The nation’s 10-year bond yield soared to 6.15 percent, the highest since Dec. 1 and approaching the 7 percent level that foresaw the international rescues of Greece, Ireland and Portugal. “The focus is on Spain and contagion,” said Elisabeth Afseth, an analyst at Investec Bank Plc in London. “There isn’t a rescue fund in place sufficient to deal with both Spain and Italy.” Read more.

In a related story, the Irish Times reported that Spain's economy minister admitted that the country has probably tipped into its second recession since 2009, as government debt yields climbed back towards danger levels today on concerns that Madrid will miss its strict budget deficit targets. Read more.