Investors are judging Spain's debt as the riskiest it has been as fears grow over the health of the country's banking sector.
The premium for Spain's 10-year bond over its German equivalent rose to 5.05 percentage points, the highest since the euro was formed.
The Spanish prime minister admitted on Monday that the situation in Spain was "extremely difficult".
But he said the banking system would not need an international bailout.
"There will not be any [European] rescue for the Spanish banking system," he told a press conference, but he backed calls for the European rescue fund to be able to lend to banks directly.
Last week Bankia, which was formed from the merger of several struggling regional lenders, requested a 19bn-euro ($24bn, £15bn) bailout, which was a much bigger amount of help than had been expected.
"We took the bull by the horns because the alternative was collapse," said Prime Minister Mariano Rajoy, adding that Bankia customers' savings were now safer than ever.
It marks an effective nationalisation for the country's third-largest bank and has raised fears about how Spain plans to pay for it.
There are reports that it is considering giving Bankia government bonds that the bank could then use as collateral for loans from the European Central Bank.
One analyst said this would amount to "an ECB bailout through the back door".
Some are concerned that by doing this, the government is not tackling the problem of the huge amount of bad property loans, estimated at 32bn euros, that Bankia is holding.
"It is not dealing with the problem of bad loans, it is just keeping them going," said Kathleen Brooks, research director at Forex.com. "It risks becoming a zombie bank," she told BBC News.
Bankia's shares lost almost a third of their value earlier, in their first trading session since the request for government help. By late afternoon they were down 13%.'No going back'
Speaking about the rising cost of borrowing that his government is facing, the Spanish prime minister said: "There are major doubts over the eurozone and that makes the risk premium for some countries very high."
"That's why it would be a very good idea to deliver a clear message there's no going back for the euro," Mr Rajoy said.
The higher bond yields rise, the more expensive it is likely to be for governments to borrow money.
Kathleen Brooks said "it seems only a matter of time" until bond investors demanded an even greater rate of return than the record high of 6.7% reached in November 2011.
Elisabeth Afseth, an analyst at Investec, said that rising bond yields in certain parts of the eurozone would make it harder for those countries to straighten out their finances.
"If it goes on for much longer, it just adds to the burden of fiscal consolidation, she said.
"If a large part of that [the yield] is spent on paying a premium to borrow, it just makes it so much harder."
Italian government bond yields also ticked higher, rising to 5.87%.Greece poll
Despite the worries about Spain, other European stock markets traded higher.
Shares were boosted after a weekend poll in Greece showed growing support for a pro-austerity conservative party.
The poll suggested the New Democracy party could gain about a quarter of the votes, leaving it as the biggest party, albeit without overall control.
Greek shares had risen 7% by Monday afternoon trading. The next elections are scheduled for 17 June.
London, Paris and Frankfurt markets all rose at least 1% at the start of trading, before trimming gains to around half that. Although both Germany and France have a public holiday on Monday, their equity markets remain open.
BBC
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