Lloyds Wholesale Banking & Markets expects Spain to ask for aid before October, as it's under renewed yields pressure even if the market is gradually shifting towards expecting a request at the end of October. "It is obvious that Rajoy tries to minimize domestic damage--i.e., a regional election in late-October--however it is arguable whether the market will allow him this time period," says Lloyds. Lloyds continues to expect 2y5y flattening as the market questions the likely front-end bond-buying by the ECB. However these doubts have been more evident in 2y10y spreads for Spain and Italy.
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