The device exploded at 12.30pm, completely destroying the waste bin just yards from the newspaper kiosk in the busy square and the main bus stop, injuring three people.
A 29-year-old woman suffered blast injuries, such as serious ear ache, trouble swallowing and anxiety, and was taken to Son Espases Hospital while a second woman, aged 58, was treated at a nearby medical clinic.
The third victim was treated for very minor injuries at the scene by paramedics.
According to sources at the Central Government Delegation in Palma, eye witnesses have provided a description of a possible suspect and today, police will continue trawling through CCTV images captured by the network of security and traffic cameras in the area in an attempt to try and gain further information as to who they are looking for.
Sources close to the investigation said the home- made device consisted of a handful of powerful fireworks strapped to a rescue flare.
Bystanders and eye witnesses said that the explosion was brutal.
One eyewitness said that he thought a butane gas bottle had exploded. I've never heard anything like it in my life, certainly not fireworks, he said.
A number of indignados who are camped out in the square as they continue their protest against the system were quick to deny having any involvement in the incident.
Hint to leave
Manu Luna, spokesperson for the demonstrators said that the explosion was very violent. I was about ten metres away from the blast and my ears still hurt, he said yesterday afternoon.
But, he stressed that his movement was not to blame. This has, and is, a peaceful protest we have going on here, he said.
Another protester, who preferred to remain anonymous said that he fears that the blast was a hint for the demonstrators to pack up and leave the square like they have in other parts of Spain such as Madrid.
Later yesterday, the Central Government Delegate to the Balearics, Ramon Socias, said that a full investigation has been opened and that evidence from the scene has been removed and will be carefully examined by forensics and explosive experts.
Socias also condemned the incident and said it was a blatant act of extreme hooliganism.
In the mean time, the blast scene remained cordoned off yesterday evening.
The staff in the newspaper kiosk, Pilar Alarcon and Easter Muñoz, said yesterday that they feared the worst when they heard the blast.