CDS market reacts badly to Spanish bank plan

The cost of protection against a Spanish government default increased today, after yesterday's announcement by economy minister Elena Salgado that the Spanish government would effectively take temporary stakes in banks that cannot achieve a minimum of 8% core tier one capital by September.

The move would involve the restructuring fund FROB putting up capital for banks failing to meet the target in exchange for equity.

CDS on sovereign Spanish debt increased from 253 basis points at close of