The yield on Spain's benchmark 10-year bond ended Friday at nearly 7 percent, a level economists regard as unsustainable, while the country's risk premium rose to 563 basis points.
The refusal of the European Central Bank to buy sovereign debt or adopt new stimulus measures beyond Thursday's highly anticipated move to reduce its main interest rate to a record low 0.75 percent triggered the spike in the risk premium, according to analysts consulted by Efe.
The risk premium is the extra return investors demand on Spain's 10-year note compared to equivalent safe-haven German debt.
The yield on Spain's benchmark bond has not closed above 7 percent since June 19, prior to a euro-zone summit in which regional heads of state and government agreed to allow the ECM permanent rescue fund - due to come online this month - to directly recapitalize banks and buy sovereign debt on secondary markets.
During Friday's session, the yield on Spain's 10-year bond briefly rose above 7 percent, a level many economists say could force Spain to seek a full-blown sovereign bailout such as those received by Greece, Portugal and Ireland.
The yield on the benchmark bond ended the day at 6.95 percent, up around 17 basis points from Thursday's close.
Greece sought a European Union/International Monetary Fund bailout on April 23, 2010, when its risk premium reached 580 basis points.
Spanish bond prices also fell due to investors' concerns that no decision on aid to Spanish banks will be reached at a Monday meeting of euro-zone finance ministers.
In an earlier Eurogroup meeting last month, the ministers agreed to extend a lifeline of up to 100 billion euros ($122.7 billion) for troubled Spanish banks and Prime Minister Mariano Rajoy's government formally requested the aid package on June 26.
Spain's borrowing costs had soared to levels Rajoy deemed unsustainable prior to the summit due in part to investors' concerns that the government would be on the hook for the loan.
After the summit ended and the direct bank recapitalization plan was announced, the price of Spain's benchmark 10-year bond surged and the yield fell around 60 basis points, the most in 10 months.
But the ECB's refusal - for now - to commit to buying government bonds or providing cheap loans concerned investors on Friday, since the ECM will have just 500 billion euros ($613.8 billion) in bailout capacity.
The Iberian nation's economy has been battered in recent years by the global recession and the collapse of a massive real-estate bubble, which has left banks saddled with toxic property assets.
The overall unemployment rate stands at almost 25 percent and nearly half of Spaniards under 25 are jobless, while tens of thousands of families have been evicted from their homes after falling behind on their mortgages.
Rajoy's administration says it will take new steps soon to bolster growth, but it must balance that aim with its commitments to bringing its budget deficit down to within EU-mandated limits. EFE