The rally in Spain

A correspondent from Spain writes to me:

I want to proudly show you
some renewed sentiment on Spain. On new info, new probability said
Bayes. Now we have new info, now I'm bullish on Spain. And happy for
being able to show it !

http://www.sintetia.com/analisis/espana-esta-de-rally

We
are experiencing a good and consistent rally. On debt, equity and CDS.
Everywhere. This is isolated from other peripherals, so the reading if
this may be even more bullish on implicit spanish risk alone.

I really think we deserve it. We've taken all the steps to see this:
reforms, austerity, and changes in the Savings and Loans entities.

In general I take a more cautious interpretation of market price movements, but I did think it was worth passing this along.  The graphs behind the link are striking (they cover some other countries too).  If you are curious, here is a Bloomberg update article on Spain.  In particular, there was a very recent decision and budget vote:

The budget shortfall was 11.2
percent of gross domestic
product last year and the government aims to cut it to 6 percent
in 2011 by paring public workers’ pay by 5 percent, reducing
infrastructure investment and raising taxes.

The extra yield investors demand to hold
Spanish debt
rather than German equivalents reached a euro-era high of 233
basis points on June 17. The spread narrowed to 169 basis points
yesterday from 176 basis points a day earlier.

I don't view this story as over, by any means, but that's the latest.  The market is rewarding a more cautious fiscal policy from Spain.