Ireland's cost of borrowing soars after dramatic sell-off

Ireland’s cost of borrowing has rocketed to its highest level since the launch of the euro in 1999 after a dramatic sell-off by bondholders and banks.

Ten-year bond yields hit 8.64pc on Wednesday, rising by more than half a percentage point. The sell-off was triggered by a cash-call estimated to be $1bn (£620m) by a clearing house on Wednesday morning.

The move increased concerns that the Irish government will be forced to seek external aid to help it bail out the country’s banks.

On Wednesday night the International Monetary Fund said that Ireland had not requested financial assistance and that relations were “normal”.

Patrick Honohan, the Irish central bank governor, said that the bond markets were over-reacting to Ireland’s problems.

“I think that what we see in the bond markets is maybe a delayed reaction to issues the bond markets have not been focusing on and...at this early stage they are probably greatly exaggerating the problems associated with that.”

He also said that there is no reason Ireland will not be able to return to the bond markets in 2011 as its government steps up austerity measures to reduce its budget deficit and restore investor confidence.

Source.