Spanish Ship Sinking the World

A worse than expected GDP number out of Spain overnight has led to mass selling of equities in the country. The selling did not stop there as its European neighbors have followed the lead.

Spanish GDP -0.4% Q/Q in Q2, the Bank of Spain estimates vs. -0.3% in Q1. This marks the third straight quarter of negative growth. After the news hit the yield on the 10-year bond spiked. It was last up 23 basis points to nearly 7.50%. The word on the street that yields above 7.0% were not sustainable. It will be interesting to see if Spain has to ask for more of a bailout? Or does the country survive with such high yields?

The reason the yield is important is because that is the rate that the country must borrow money. The higher the yield, the higher the interest payment and for country's already in trouble, a spike in yields could cause a default.

One silver lining is the Eurostat release of EU debt numbers today. The report shows government debt to GDP ratios for all EU countries. The worst is Greece with a 132.4% reading, but Spain falls in the middle with 13 countries with worse ratios. Spain is currently at 72.1%.

The Spain ETF ($EWP) is set to open lower along with the SPDR S&P 500 ETF ($SPY). The futures in the US are pointing to a loss on the open of 1.3%.