Irish bonds moved lower today, with bond yields once more moving above 6.2 per cent.
At 3.44 pm, the yield on the 10-year bond was 6.236 per cent, up from the opening level of 6.001 per cent. Yields had fallen to under 6 per cent yesterday.
The spread between Irish bonds and the German bund widened to 382.5 basis points.
Yields on the benchmark 10-year bond hit a high of 6.7 per cent last month as investors worried about the State's level of sovereign debt.
The euro zone's "peripheral" markets - primarily Spain, Greece, Portugal and Ireland - saw investor confidence ebb away earlier this year amid fears of a sovereign debt default. But as those worries have abated, the region's higher-yielding debt markets have seen demand for their paper grow.
Spreads on Spanish 10-year bonos against the equivalent German Bund contracted to around 160 basis points from around 163 bps at the opening, while spreads for Greek 10-year debt stood at around 666 bps after opening at around 677 bps.
Short-term financing costs for the Greek and Spanish governments fell from last month at auctions today, reflecting an easing of concerns over conditions in the euro zone economies struggling most with debt.
Spain sold €6.4 billion of T-bills, with a 12-month issue seeing average yields slip 66 basis points from September to 1.842 per cent and yields down 137 basis points for the 18-month bill to 2.009 per cent.
Greece auctioned €1.17 billion of a rolled over three-month T-bill with the yield slipping 23 basis points to 3.75 per cent and interest strong among foreign investors.
Greece hopes to start issuing longer-term debt on the bond market again next year and debt agency (PDMA) chief Petros Christodoulou told Reuters that foreign investors had accounted for more than half of today's sale.
"What was really important was not the cover ratio nor the yield, which came as expected, but the fact that foreign investors bought more than 50 per cent of the amount auctioned," said BNP Paribas analyst Ioannis Sokos.
"This shows that foreign markets' trust in short-term notes is gradually returning. The mood has changed since the EU/IMF's positive review of the Greek economy last month. The default scenario is becoming more and more distant."
The Greek debt agency paid a yield of 3.75 per cent, down from 3.98 per cent in September, with a bid-to-cover of 5.19 after 6.25 in the previous auction.
The European Commission has played down speculation it could extend an emergency loan programme for Greece, saying on October 12th the matter was not under discussion.
But markets have still been encouraged by a series of reports hinting that Greece could get some leeway on the duration of support as it tries to manage a debt burden worth 140 per cent or more of gross domestic product in future years.
The Spanish issues also sold well, with yields on both down from a month earlier and a long way from this year's highs in June, with foreign participation between 40 and 60 per cent, according to a source close to the operation.
"Yields will continue to fall slowly this year and the government will have an easier time putting debt in the market. What could change this trend is if Spain fails to meet growth and deficit targets at the end of the year," said an analyst at Ibersecurities, Juan Rodriguez Rey.
Additional reporting: Reuters