Spain's bank bailout bought a few months of liquidity, but at what cost? Well, the cost can be seen perfectly on the chart below, which shows Spanish and Italian sovereign bond spreads literally exploding.
Recall what we said yesterday [3]: "Keep a close eye on Spanish sovereign bonds at the moment when the bond market understands what just happened, and once the euphoria over the very short-term bailout of insolvent Spanish banks passes. Because a month from today another €100 billion will be required, then another €100, and so on." The moment can be seen very distinctly on the chart below: it happened at 2:00am Eastern, and the bond market has not looked back since. We are likely hours away from screams for the ECB to come and re-bail out a just bailed out Spain.
[4]
Chart: BBG