Spain's short-term borrowing costs almost tripled during Tuesday's debt auction, a day after Moody's downgraded the country's banking system.

The three-month yield was 2.362 percent, up from 0.846 percent during last month's bond auction. The six-month paper rose to 3.237 percent from 1.737 percent in the same comparison. Spain sold €1.6 billion ($2 billion) and €1.48 billion in three-month and six-month bonds.

On Monday, Spain officially submitted its request for up to €100 billion to rescue its banking system, still reeling from a busted real estate bubble followed by recession and sky-high unemployment.

On Thursday and Friday European Union leaders will meet again to figure out what to do about the Continent's speading 30-month-and-counting sovereign debt crisis.

A failure to see much in the way of traction at this week's EU summit, as seems decidedly possible, will likely put further strong additional pressure on Spanish yields thereby rapidly raising the prospect of additional bailouts, Richard McGuire, strategist at Rabobank, told Reuters.