Spanish Nervousness is Back

As we warned about Spain to revive the market nervousness a few days ago, we are suddenly back to watching those Spanish yields climbing again. Markets do not like uncertainty. The contradictory messages from Spain, is once again making investors “confused”. With markets at critical levels, vol at relatively low levels, and an extreme reading in the put call ratio, you should be prepared for a sharp pullback.

Spain is still in pain. From El Pais.

“Uncertainty is a risk,” said the Spaniard, who is also the EU commissioner for competition. “Sometimes it is difficult to take a decision and this is a very complicated situation. Any alternative has its pros and cons, but to maintain uncertainty implies a risk that the debt market or another factor increases tensions again. We have learned in the past two-and-a-half years where these tensions could lead to.”

According to government sources, Rajoy wants to delay asking for a second bailout on top of the rescue package for the country’s banks and may even eschew the option if the economy improves sufficiently to avoid the political stigma involved.

However, Economy Minister Luis de Guindos is in favor of requesting a second intervention as soon as possible to ease market pressures. He would like to see one of the European rescue funds buying Spanish debt in the primary market to trigger purchases in the secondary market by the European Central Bank (ECB).

and from Bloomberg.

Spain plans to sell as much as 4.5 billion euros ($5.9 billion) of bills today as 10-year yields traded above 6 percent for a second day. Rising yields may force Spain into seeking assistance, European Central Bank Governing Council member Luc Coene said yesterday. China and Japan’s worst diplomatic crisis since 2005 is putting at risk a trade relationship that’s tripled in the past decade to more than $340 billion. Confidence in Germany, Europe’s largest economy, probably improved this month, economists said before data from the ZEW Center for European Economic Research.

“There are still a number of areas of concern,” Tim Schroeders, who helps manage about $1 billion at Pengana Capital Ltd. in Melbourne, said in a telephone interview. “Investors will become increasingly nervous if a policy response doesn’t materialize in China. There are still tensions between European partners in terms of what shape and form the ultimate rescue takes. The devil lies in the detail.”