Spanish spies seek short sales

Apparently, the Spanish intelligence agency has been enlisted to help find out what is behind recent “speculative attacks” in the financial markets.

The Economic Intelligence Unit – created to defend the economic, commercial and industrial sectors in Spain – wants to know whether investors’ behaviour and “Anglo-Saxon media aggression” can be explained by market fundamentals, or whether something more sinister is behind the moves.

The cost of insuring against Spanish default has risen greatly since November, although it is not that high by historical standards (see chart) and not a patch on Dubai. $129,000 will currently buy you default insurance on $10m debt. The rising cost of insurance suggests the markets are pricing in a rising risk of default on government debt.