Irish bonds gained for a third day today as a mission from the International Monetary Fund (IMF) began formal discussions with the Government on a rescue package for the State.
By 1.25pm, the yield on the the 10-year Irish bond was 8.015 per cent, 0.103 per cent lower than its opening of 8.118 per cent. The spread to the benchmark German bund was 533.5 basis points.
Shares in Irish banks rose this afternoon, with Irish Life and Permanent gaining 13.6 per cent to trade at €1.07 on the Dublin market.
AIB was up 12.98 per cent to 47 cent, and Bank of Ireland gained 9.3 per cent to also trade at 47 cent.
Speaking in Dublin today, billionaire Dermot Desmond said Bank of Ireland or AIB should be sold to overseas buyers, as the country struggles to cope with a "financial emergency".
There are fears that Ireland's debt troubles may spill over to other highly indebted peripheral euro zone countries such as Portugal.
European Bank for Reconstruction and Development president Thomas Mirow today said the question of whether Ireland needs to be rescued to avoid contagion in the euro region has to be answered with a "clearly yes".
Rescuing Ireland "is not sufficient to solve all the problems, but it is necessary now", Mr Mirow said at a panel discussion in Frankfurt.
Portuguese 10-year bonds yields fell 4 basis points today. The spread over bunds narrowed 17 basis points this week, the first decline in more than a month. The Greek spread is four basis points wider this week, while the Spanish spread grew one basis point.
German 10-year bond yields fell from near their highest in three months as Federal Reserve chairman Ben Bernanke prepared to defend the central bank's quantitative-easing policy in a speech in Frankfurt today.
"Ireland will remain in the spotlight for the European bonds market today," said David Schnautz, a fixed-income strategist at Commerzbank AG in London.
While Ireland is fully funded until the middle of next year, the yield on Irish 10-year bonds soared to a record 652 basis points above bunds on November 11th.
Additional reporting: Bloomberg