Spain will ask for a bail out until it is forced to?

Another week starts and we are still faced with the same deadlock : it does not look like Spain will ask for a bail out until it is forced to. So despite a bit of positive noise for risk this morning, following the doctrine change at the IMF regarding austerity and EU leaders mulling giving more time to Greece, rates have not really gone anywhere and do not really have far to go until the Spanish situation is clarified, one way or another. It also feels like the market does expect this bailout sooner rather than later (this is an assumption based on the price action on futures each time there is some sort of negative headline on Southern Europe) which is starting to be dangerous given the blatant Spanish reluctance.

In the meantime the volume of issuance started picking up again with several German and Austrian names issuing in USD, pushing the basis tighter despite lower spot. There are also talks of a new 5Y EFSF, the market reception for their last issuances has generally been rather cold, the spread and the book building will be another credibility test for the European Union.