Spain has been hit by a two-notch downgrade by Standard & Poors, taking the country's rating to BBB+. That is the sort of rating that a few years ago might have been seen at the lower-to-mid end of the corporate bond market, not an EU member with a $1.5 trillion GDP, ranked number 12 in the world's economies.  What's more, S&P have stated that Spain's budget problems are likely to get worse.

The long-term P&F chart below shows a clear cycle of downtrend, base and now; uptrend. For the moment, yields are holding under the important 6% YTM level. Once that is broken, traders will be scrambling for the exit door.

We watch the situation, and will add a short position in the 10yr benchmark as and when the yield pushes above 6%.