An important indicator will be released tomorrow at 10am Madrid time - the August proportion of bad residential and corporate loans in Spain. The number is important because it provides a signal of how dire the situation may get for the Spanish banking system. Specifically it could give us an indication if the Bank of Spain's assessment of bank recapitalization is correct or if the more conservative measure from Moody's is closer to reality (see discussion). This is reminiscent of the mortgage delinquencies in 2007-2009 in the US - no one really knew how bad it was going to get. The number may also give us a glimpse into how soon the Spanish government will officially ask for aid from the ECB. If delinquencies continue to rise, it may introduce a new wave of volatility into sovereign debt, which is heavily tied into the banking system. And the ECB's backstop is the only way at this stage to stem another potential selloff.