Spanish Finance Minister Elena Salgado said there's "absolutely" no risk the country will need an international bailout as its borrowing costs compared with Germany's surged to a euro-era record.

Asked in an interview on Punto Radio in Madrid if Spain risked having to seek a rescue like Ireland or Greece, Salgado said "absolutely not." The euro faces "speculative attacks" which Spain is in the "best conditions to resist," she said.

Spain's 10-year bond yield surged 20 basis points to 5.12 percent, pushing the spread over German bunds to the widest since the euro was created in 1999, as Ireland's bailout prompted speculation that Portugal and Spain may also need help.

Eoin Treacy's view There is an element of déjà vu in the way short sellers are moving down the line of potentially distressed countries. A typical strategy in this scenario is to short the respective bonds and to start buying CDS on the same bonds. One might argue that it essentially making the same bet twice but what it succeeds in doing is affecting crowd sentiment so that yields rise as the cost of insuring against default rises. What started with Greece, which was the most obvious candidate for speculative short selling, has evolved into an Iris-led problem as that country's banking problems have been exposed and is moving onto pressuring Portuguese bonds. Spain is an altogether different story because of its comparative size and will probably be treated much more seriously by the European Commission.

At this stage it is instructive to monitor sovereign spreads. Here they are in order of the progression of attention they are receiving from short sellers. Greece, Ireland, Portugal, Spain and Italy. Greek spreads remains close to their summer peak just below 1000 basis points (bps). Irish spreads are closing in on 600 bps. Portuguese spreads moved above 400 bps this week. Spanish spreads consolidated below 200 bps from May but broke upwards this week and Italian spreads (166 bps) also hit new highs this week.

In the context of the EU economy neither Greece, Ireland nor Portugal figure very highly. A run on Spanish bonds would be an altogether more pressing issue. The ECB intervened to at least temporarily chasten short sellers last May. As yields rise and sentiment towards the currency union deteriorates another such move is becoming increasingly likely. Purchasing bonds might not be covered by the ECB's mandate but that didn't stop it before and is unlikely to be much of a barrier the next time around.