Ten-year benchmark bond yields rose on the session following three negative releases as the Spanish government continues to fail in its attempt to calm markets and boost confidence in its ability to recapitalize domestic banks.  Unfortunately, the sentiment has kept any gains in the Euro to a minimum against the US dollar – only higher by 0.2% on the day.  Any sharp movements in the major currencies are likely to remain muted ahead of this week’s US non-farm payrolls report.

• Spanish retail sales plummeted by a record in April, declining by 9.8% year on year following a 3.8% annualized drop in the month of March – a 22nd straight negative number.  Attributed to the drop has been rising unemployment in the area of 24% and lower consumer confidence.
• The Bank of Spain announced today that future growth prospects have been revised lower, yet again.  Forecasts are now for the Spanish economy to have contracted by 1.7% in 2012, compared to earlier expectations of a sub 1% figure.  The revisions are a likely extension of the economy’s inability to bolster consumption domestically.
• Spain’s Prime Minister Mariano Rajoy has now backed out of a deal to refinance the Bankia bailout with treasury bonds – a plan that was originally established as the front running option.  However, with investor discontent pushing yields higher, and the likelihood that the ECB would shy away from complying, Rajoy has now backed out leaving the bailout in limbo as the government seeks out alternative financing means.  This will undoubtedly leave speculation leaning towards a European Union request for funding as options narrow for Spain.  Currently Spanish 10-year yields remain elevated at 6.45% after hitting as high as 6.49%.

More on the Euro - EUR/USD Technical Outlook – May 29th