Yield’s on Spanish sovereign debt are skyrocketing, despite the latest $125 billion bailout. If Spanish banks fail, the cash-strapped government must bail them out. Unfortunately, failing banks have been the biggest buyers of Spanish debt. Given collapsing bond prices, an economy in recession, rising unemployment, a sovereign credit downgrade and falling property values, Spanish banks look horrible. Making matters worse, the bailout money is senior to all Spanish government bondholders.