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ERROR: type should be string, got "https://online.wsj.com/article/SB10001424052702303768104577460442153217320.html\nBulls Retreat on Spain Bailout Plan\nGlobal Markets Reverse Early Gains as Investor Confidence Wanes\nA number of Spanish banks say they don't need state aid just two days after the Spanish government announced a €100 billion ($125 billion) bailout to save the sector. WSJ's David Enrich assesses their claim. Photo: Getty Images\nBy Charles Forelle And David Enrich\nUpdated June 12, 2012 8:21 am ET\nInvestors gave a thumbs down to Spain's planned bank bailout, setting off a global market rout that puts the country and the euro zone in a dire position.\nSpain agreed over the weekend to accept as much as €100 billion ($125 billion) in European aid to recapitalize its banks, a plan designed to ease concern that Spain itself could be dragged down by the declining fortunes of its banks.\nFollow every article, blog post, video and tweet on the debt crisis from our reporters across Europe.\nSpain Banks Face Europe's Scrutiny\nMarketBeat: What Spain Means for Others\nCyprus Is Fifth Nation Seeking Bailout\nQ&A: Spanish Bailout | Heard: Few Answers\nInstead, confidence in Spain deteriorated among the constituency the country most needs to impress: the buyers of its government bonds. After a short-lived burst of strength Monday morning, Spanish bond yields reversed course and began a sharp rise. The 10-year bond was yielding 6.521%, three-tenths of a percentage point higher than at Friday's close. Bond yields rise when their prices fall; a higher yield indicates an increased perception of risk.\nCredit-default swaps on the Spanish government, insurance-like contracts that pay off if Spain defaults, zoomed Monday into record territory.\nSimilar U-turns were seen across financial markets. Spain's benchmark stock index jumped as much as 5.9% before ending down 0.5%. Other European stock markets started the day strong but steadily lost ground. Italian stocks dropped 2.8%.\nIn the U.S., the Dow Jones Industrial Average rose almost 100 points before tumbling to close down 142.97 at 12411.23. U.S. bank stocks were among the biggest drags on the market.\nInvestors' disillusion with the Spanish bank plan reflects worries about the strength of Spain itself—and the risks for those lending to it. Meantime, many investors already are looking ahead to this weekend, when Greek elections could become a prelude to Greece's exit from the euro zone.\nThe bailout doesn't help Spain repair its tattered economy, and many financial-market participants Monday expressed concern that it could actually damp appetite for bonds.\nThe unwinding was remarkable for its speed: Cheers for the plan lasted just hours—by the end of the trading day any euphoria had evaporated and was replaced by gloom. That suggests Europe is quickly running out of time to find a bolder fix for the growing sovereign-debt crisis.\n“ The hourglass…has been turned over, but each time...there seems to be less and less sand in it. ”\n— —Peter Boockvar, portfolio manager at Miller Tabak & Co.\n\"The hourglass…has been turned over, but each time it's happened in Europe over the past few years there seems to be less and less sand in it,\" said Peter Boockvar, portfolio manager at Miller Tabak & Co. in New York.\nEuropean officials, including Austria's finance minister, expressed their preference for using a new euro-zone rescue fund to provide the money to Spain.\nThat fund would be paid back before regular bondholders if Spain defaults on its debt. It isn't clear if the euro zone will use the new fund, which isn't yet operating, or an older fund that doesn't assert such seniority.\n\"The lack of detail and issues surrounding bondholder seniority left the market wary,\" said Suki Mann, a credit strategist at Société Générale. Ratings firm Standard & Poor's said Monday that the seniority issue could \"constrain Spain's access to the capital markets.\"\nInitially, some market participants speculated that any loss of seniority by bondholders could trigger payments on credit-default swaps on Spanish government debt, because it would be considered a \"credit event\" that changed the terms of the contracts. But the industry body overseeing CDS later issued a statement saying that was unlikely.\nBehind the action is the swirl of concern about Spain, its banks and the mechanics of the bailout.\nOver the weekend, European finance officials pressed Spain to accept help for its banks. The Spanish government agreed to ask for up to €100 billion to recapitalize lenders. Spain pushed hard to separate itself from its banks, at one point arguing that European aid should be channeled directly to the banks, not through the government. But Europe's bailout funds don't permit that, and the funds will lend directly to Spain, which in turn will use the aid to buy stakes in banks.\nSpain's request for a bailout for its banks represents yet another mixed success for the U.S. in its two-year-long effort to press Europe to get on top of its debt crisis. Sudeep Reddy and Charles Forelle have details on The News Hub. Photo: Reuters.\nWhile the bailout helps Spain by providing it with funds upfront—and at a relatively low cost—to help the banks, the bailout isn't a gift: Spain must repay the loan. That means potential bond buyers are lending to an even-more indebted country.\n\"Clearly, the debt dynamics remain extremely poor, and it fundamentally doesn't address the issues with the economic environment,\" said Ranjiv Mann, economist at Rogge Global Partners in London, a fixed-income manager with more than $50 billion under management. \"It's not obvious what are the attractions of Spanish government debt.\"\nThe bank rescue in effect saddles the Spanish government with some of the banks' problems. By using aid money to buy bank shares, Spain will be first in line to suffer losses if the Spanish banks get deeper into trouble. At the same time, it will be obliged to repay the aid it is getting from Europe.\n\"Spain's capital injections entail a transfer of risk from the private to the public sector,\" said Phoenix Kalen, a Royal Bank of Scotland macro credit strategist.\nMs. Kalen added that Spain is likely to need \"more external help going forward,\" for the government, not just the banks.\nOne key variable in determining Spain's financial future is the willingness and ability of Spanish banks to keep gobbling up their government's debt.\nBrimming with cheap, three-year loans provided by the European Central Bank, Spanish lenders this year have been among the few willing buyers of Spanish sovereign bonds. Their heavy buying had helped keep a leash on bond yields, slowing their steady rise.\nBut Spanish banks largely have exhausted their stockpiles of ECB funds, analysts say. Now the question is whether they will keep buying sovereign bonds.\nThere are signs that some banks are less than willing. For example, Banco Bilbao Vizcaya Argentaria SA, BBVA -0.40% Spain's second-largest lender, is replacing maturing Spanish government debt with new bond purchases, but isn't increasing its overall holdings, a spokesman said.\n\"Everybody's attention right now is on their banks and their ability to do it,\" said Oliver Burrows, a senior bank-credit analyst at Rabobank International in London. \"You would hope they don't go out\" and buy more sovereign bonds, because that will only increase their perceived riskiness.\n—Nicole Lundeen and Katy Burne contributed to this article.\nWrite to Charles Forelle at charles.forelle@wsj.com and David Enrich at david.enrich@wsj.com\nCopyright ©2020 Dow Jones & Company, Inc. 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