Waiting for Spain

The European rally has ended, and now the waiting begins. It appears likely that markets will remain unsettled for some time—possibly until European leaders convene for an October summit.

Spanish bonds strengthened in the first half of September on hopes that the ECB will buy some. But the ECB chief has made clear that he won't act until Spain asks for a bailout.

And the more bond yields fall—which happens when prices rise—the less reason Mr. Rajoy has to ask for one.

"Everyone is waiting for Spain to put its hand up," said Marchel Alexandrovich, an economist at Jefferies & Co. in London. "The sooner it happens the better."

For Mr. Rajoy, though, that is easier said than done.

A bailout means accepting the oversight of international authorities, who would lean hard on Spain to make painful cuts and unpopular reforms.

The ECB's plan is new and unproven. In an ideal world, the central bank and the euro-zone bailout fund would each buy some bonds alongside private investors. But private investors could stay away, or even dump their existing holdings if they aren't certain the central bank and the fund will be consistent buyers.

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