For several hours yesterday, Spain crossed the border into insolvency. Its risk premium rose above 500 basis points, and if it goes much higher than that a bailout would be imminent. In Greece, Italy and Portugal this level has been crossed before only to recover soon thereafter.
Further, in those three countries 10-year debt has risen above 8% interest rates. By way of comparison, those notes are priced at 6.3% in Spain right now.
Another calming factor is that the Spanish Treasury has issued 53% of its 2012 debt and, therefore, has sufficient liquidity (nearly 50 billion euros) to cover its needs for the year.
For the near term Spain will survive, but something has to be done to lower debt interest rates as soon as possible and to regain confidence in Spain's creditworthiness.
