The yield on 10-year Irish bonds fell below 8 per cent this afternoon despite mounting speculation the State will seek a financial bailout from Europe.
The yield on Irish 10-year bonds closed at 7.946 per cent today, down from an opening of 8.141 per cent.
The spread to the German bund stands at 537 points, down almost 25 basis points on the day.
On Friday, yields on 10-year Irish sovereign debt fell to 8.14 per cent, having hit highs of more than 9 per cent on Thursday, as EU leaders said that current lenders to the Irish Government would not face a writedown in the case of a bailout.
Despite the clarification activity in Irish bonds remained extremely low on Friday, even among primary traders of Irish Government debt, with the result that a minimal level of trades prompted a disproportionate level of price and yield movement.
Bloxham this morning said a move back upward in yields above the 9 per cent mark could force Ireland’s hand.
"Brussels may be so concerned that Ireland’s crisis could destabilise the whole Eurozone that it may effectively force Dublin into a bailout," the broker said in a briefing note.
European Central Bank council member Miguel Angel Fernandez Ordonez said the lack of a "final decision" by Ireland has contributed to market tensions.
"The situation in the markets in recent weeks has been very negative due in some way to the lack of a final decision by Ireland," Mr Ordonez told reporters today in Madrid, without elaborating.
"It's not me who should take a decision about Ireland, it's Ireland that should take the right decision at the right moment."
Meanwhile NCB Stockbrokers has insisted it was “rational” for investors to buy Irish bonds as prices overstate the likelihood of default.
“On the assumption of a 70 per cent recovery rate, the Irish 10-year bond yield and 10-year credit-default swap imply that there is an 85 per cent probability of Ireland defaulting some time in the next 10 years,” Brian Devine, chief economist at NCB, wrote.
