Irish bond yields climb higher

Irish bond yields climbed higher today as borrowing costs for Europe's most indebted nations hit record highs.

By 1.56pm, the yield on the 10-year bond was 9.169 per cent, 13 basis points higher than its opening level. The spread to the German bund was 647.8 basis points.

"When Ireland accepted help, the general feeling in the market was that this could restore some calm; that hasn't been the case," said Michiel de Bruin, who oversees about $35 billion as head of European government debt at FandC Netherlands in Amsterdam. "Authorities should be doing their utmost to calm the situation."

While Ireland has enough money to pay its debts until the middle of next year, it has requested a bailout from the European Union and International Monetary Fund amid concern the cost of rescuing its banks would overwhelm government finances.

The country's capitulation in accepting a bailout of its banking industry stoked concern that other countries also will have to seek aid.

Portugal, which today denied it would need to be bailed out, saw its 10-year yield hover around the 7 per cent mark, while Spain's yield was above 5.2 per cent.

A majority of euro region officials and the European Central Bank are putting pressure on Portugal to accept aid that helps stop contagion spreading to Spain, the Financial Times Deutschland reported today. German government spokesman Steffen Seibert said the nation isn't pushing Portugal to seek aid. An official at the office of Portuguese prime minister Jose Socrates also denied the report.

The euro fell 0.9 per cent to $1.3238 today.

"It's no longer taboo to speak about a restructuring," said Johannes Jooste, a portfolio strategist at Bank of America's Merrill Lynch Global Wealth Management in London. "The fact that bond yields continue to rise and put pressure on countries that have to fund from the market makes investors less and less confident, and it's bringing forward the day of reckoning."

The Irish index of shares fell 12.83 points this afternoon. Bank shares, which had shed some value early in the session, were mixed this afternoon as both AIB and Bank of Ireland made some gains. By 1.50pm, AIB was up 6.23 per cent to 31.9 cent, after earlier hitting lows of 28.9 cent, while Bank of Ireland was 0.4 per cent higher at 25.7 cent, after a session low of 24 cent.

Irish Life & Permanent was down 16.2 per cent to 50 cent.

Additional repoting: Bloomberg