Spanish auction on short-term debt took place on Tuesday showed a remarkable rise in interest rates which reflected the mounting concerns the debt contagion is moving from one country to another.

The Treasury sold 3.2 billion euros, less than the maximum target set at 3.5 billion euros, of 1-year notes and 18-motnh bills at 5%, the highest since 1997, compared with last month's rate of 3.6%, and 5.2% from the prior 3.8% respectively.

The Spanish government will face another tough test when it sells between €3-4 billion on Thursday.