Spain's Default Risk Premium

Spain sold about €3 billion ($3.68 billion) of sovereign debt recently. Unfortunately for the Spanish government and taxpayers, the YTM of its 10-year bonds was about 7.02 percent, dramatically higher than the 1.22 percent for comparable German government bonds. Evidence of the financial problems in the Spanish government is seen by the government's request for a €100 billion bailout. Perhaps even more worrisome for Spain is that the YTM on its 2-year bonds was 5.20 percent.