The National Treasury Management Agency (NTMA) sold €400 million of treasury bills at an auction this morning.
The was less than the maximum amount of €500 million the agency was seeking to sell.
Some €300 million of securities due February 14th, 2011 were sold at an average yield of 1.907 per cent, compared with 1.925 per cent at a sale on September 9th.
The NTMA also sold €100 million of bills maturing April 18th, 2011 at an average yield of 2.231 per cent, up from 2.19 per cent at the previous sale.
The benchmark 10-year bond climbed higher today, rising from 6.29 per cent this morning to close at 6.47 per cent, some 418 basis points above the German Bund.
Bond yields have risen in recent weeks as concerns persists about the size of the economy's budget deficit and sovereign debt.
Today, the cost to protect Ireland's debt from default climbed to a record, leading a surge in European sovereign credit-default swaps, on concern Anglo Irish Bank won't pay back bondholders in full.
Borrowing costs for the most indebted euro-region nations jumped today after European manufacturing growth slowed more than economists forecast, raising concern the nations may struggle to trim their budget gaps as the economic expansion slows.
Ireland's economy shrank 1.2 per cent in the second quarter, figures from the CSO showed today.
"It is unlikely the government will achieve its growth target this year, putting pressure on the budget and international sentiment," said Austin Hughes, chief economist at KBC's Irish unit. "The headline numbers are disappointing, although there are some signs of light in the underlying data."
Investors are fleeing Irish bonds amid speculation the cost of shoring up the country's banks will hurt efforts to tame the European Union's biggest budget deficit. Government guarantees covering some of the subordinated debt sold by the nation's banks come to an end next week, while Central Bank governor Patrick Honohan said in June he didn't know if junior bondholders in Anglo Irish will be "made whole".
"Ireland got pummeled as the ongoing concerns about banks, political and austerity came rolling back in," Bill Blain, joint-head of fixed income at Matrix Corporate Capital LLP in London, said today in a note to clients.
The original banking guarantee, covering all banks' liabilities aside from undated subordinated debt, is due to come to an end on September 29th. A second guarantee in January 2010, the so-called Eligible Liabilities Plan, allows banks to issue bonds of up to five years in duration. The ELG is subject to review every six months, and is currently due to expire at the end of December.
Lenders can continue to issue ELG-covered bonds until then and notes will be government-guaranteed until maturity.
The ELG does not include any subordinated debt or asset-covered securities.
Additional reporting: Bloomberg