The National Treasury Management Agency (NTMA) plans to increase its borrowing on two Government bonds next week in its sixth monthly auction of the year.

The NTMA, which manages the Government’s debt, has said it will auction a 2016 and 2018 bond. It has raised €8.5 billion in monthly auctions this year, bringing to €13.5 billion the total amount raised this year. The NTMA has raised about two-thirds of the Government’s €20 billion borrowing requirements for 2010 so far.

Irish borrowing costs remain high amid signs that the global economic recovery is faltering and the sovereign debt crisis is spreading.

The spread, or difference between the rate investors demand to hold Irish debt above the benchmark German bond, remained near a one-month high of 258 basis points (2.58 per cent).

The cost of insuring against a default on financial company bonds surged yesterday and inter-bank lending rates climbed as the market for new bank bonds froze.

Irish Life & Permanent, the heaviest borrower in the money markets among Irish financial institutions, dropped 10 per cent, or 18.8 cent, to €1.66 a share. AIB closed down 7 per cent to 88 cent.

“The markets are clearly difficult in terms of access to funding and the cost of that funding,” said Barry Walsh, head of investor relations at Irish Life & Permanent.

The debt crisis is hurting the financial institutions’ ability to raise borrowings, making it difficult for them to refinance debt.

Irish banks have €74 billion worth of senior debt and inter-bank lending backed by the Government maturing before the end of the guarantee in September.

Meanwhile, underwriters guaranteeing Bank of Ireland’s rights issue are expected to be left with about 150 million new shares out of the 3.1 billion issued as the bank records a take-up of about 95 per cent among existing shareholders.

The bank is making €1.7 billion in the offer, which closed yesterday, as part of a wider €3.56 billion capital-raising plan. – (Additional reporting Bloomberg)