The Spanish government said today it will decide within the next few weeks whether to ask for outside financial help.
It noted that it might opt for a precautionary line of credit instead of bailout cash.
Spain is under pressure to tap a euro zone financial aid system that would give the European Central Bank the green light to buy its government bonds.
That would lower Spain's borrowing rates in bond markets, relieving its financial burden.
A spokeswoman for the Spanish economy ministry, said the government was also still considering not asking for any aid at all, not even a credit line. She was speaking on condition of anonymity in keeping with ministry policy.
The issue is likely to dominate a summit of the 27 leaders of the European Union tomorrow and Friday. Germany has said Spain does not need a bailout and Prime Minister Mariano Rajoy may be reluctant to accept a rescue ahead of regional elections this Sunday.
But analysts say that if Spain delays the request too long, investors may grow jaded and sell off its bonds again.
Rising speculation that Madrid will ask for help soon eased pressure in the bond markets today. The interest rate on the country's benchmark 10-year bond was down 0.29 percentage points to 5.474% this evening.
It has hovered close to 6% in recent weeks amid uncertainty over whether Spain would apply for aid or not.
The market improvement was also partly due to relief that Moody's rating agency did not cut its credit grade on the country to junk status, as had been widely feared in recent weeks.
Spain is at the core of Europe's financial crisis because, as the fourth largest economy in the 17-country euro zone, it would be hugely expensive to rescue should it lose access to bond markets.
The country's financial problems did not stem from government overspending, as in Greece's case, but from huge losses that its banks incurred after a property sector crash. Regional governments are also heavily in debt and need help from the central government in Madrid.
The economy is also in terrible shape - it is in its second recession in three years, unemployment is near 25% and forecasts for the coming year are grim.
Spanish unions are considering launching a general strike against austerity measures on November 14th, union sources said, eight months after the last walk-out and coinciding with strike action in neighbouring Portugal.
Moody's confirms Spain's rating
Moody's Investors Service last night confirmed its rating on Spain's government debt but assigned a negative outlook.
This signals that a downgrade is still possible in the coming months.
The rating agency said Spain's efforts to improve its financial position and the EBC's willingness to lend support should give the government the time and flexibility it needs to stabilise its public debt over the next few years.
It cited the government's commitment to measures that are helping bring Spain's debt burden under control.
Spain has introduced several austerity measures and financial and labour reforms to try to convince EU partners and investors that it is serious about getting its finances in shape.
Moody's kept Spain's rating at "Baa3", its lowest investment-grade rung. The negative outlook reflects Moody's recognition that the risks are still high for the financially troubled country.
Spain's rating could be undercut by a lack of progress toward stabilising the country's finances, or by external factors, such as Greece exiting the euro zone, Moody's said.
The move by Moody's comes after rival agency Standard & Poor's last week downgraded its rating on Spain's, leaving it also just one notch above junk status. S&P said the country's deep recession, high unemployment and street protest were limiting the government's options to deal with the financial crisis.
Spain's government and banks are struggling through the country's second recession in three years, with unemployment at roughly 25%. The government is also deciding if it will request a bailout from the European Central bank.
Rating agency reviews indicate how risky an asset is to hold and can have an impact on its ability to borrow money at competitive rates.
S&P also said the government's hesitation in requesting a bailout was raising the risk of its rating. While some expected that would nudge the Spanish government toward making a bailout request sooner rather later, it is unclear how Moody's decision will affect its temperament.