Despite the odd nervous glance at its banking and real estate sector, euro zone bond investors aren't viewing Spain with anything like the jaundiced eye they reserve for Ireland, Greece and Portugal.
While premiums demanded to hold the unfortunate threesome's debt rather than safe German bonds have unsurprisingly blown out this year, that required to hold Spain's has narrowed quite considerably.
Ten-year Spanish debt yields are about 1.88 percentage points over equivalent German paper, in from 2.24 percentage points in January.
However, if the comment of its officials is anything to go by, the European Central Bank is going to raise its key interest rates next week.
President Jean-Claude Trichet added to a month-long string of rate-hawkish jawboning Monday evening. He said inflation rates were "durably above" the common definition of price stability in the euro zone.
In the nuanced world of central-banker-speak, that's as close to "we are going to raise interest rates" as investors are ever likely to hear. Ensuring price stability is, after all, part of the ECB's mandate. A transient threat can be acknowledged without action, but a durable one demands a move.
Moreover Tuesday brings consumer price index numbers out of Germany, with the highest levels since October, 2008 on the cards. The markets expect a 2.2% annual rise, which would see Mr. Trichet's argument underlined.
All very well for Germany, but can Spain handle higher rates?
One thing is certain, its economy is hardly crying out for them.
Spanish growth was only 0.2% in the final quarter of 2010, not the sort of pace which usually demands the application of monetary brakes. Unemployment is over 20%, youth unemployment more like 40%.
With these gloomy stats in mind the position of Spanish economy minister Elena Salgado looks a little optimistic. In a radio interview broadcast March 22 she said: "I think we can absorb it (a rate hike) without any problem at all."
Remember Spain also saw its sovereign debt rating cut by a notch earlier this month by Moody's. The agency is worried about the costs of recapitalizing the country's savings banks, or cajas.
Then, just four days ago it downgraded no fewer than 30 Spanish banks as well.
There is some good news, of course. Unlike Portugal, the Spanish government has been reasonably successful in its fiscal and macroeconomic reform efforts. This has led to an improved perception on the part of investors, said analysts at Credit Agricole.
And, while Spanish banks certainly racked up huge losses after failed bets on the property market, their exposure as a share of gross domestic product was smaller than in already bailed-out Ireland.
All the same, Spain is a large euro zone economy with low growth, high unemployment and a ongoing program of State fiscal austerity in train.
The markets may be persuaded to share Ms. Salgado's optimism in the face of a modest interest rate hike, but should there be any hint of more she may find herself more lonely.
Source: Wall Street Journal