A spokesperson for the Department of Finance has said there is 'absolutely no truth' in a market rumour that the Government may have to call in outside financial help.
The move came as Ireland's cost of borrowing soared on bond markets. The interest rate - or yield - demanded by investors to lend 10-year money to Ireland hit 6.39% at one point, almost four points above the equivalent German rate. It was 6.35% late this evening.
The department says the rumour is due to a 'misinterpretation' of a research report issued by British bank Barclays Capital yesterday.
The cost of borrowing for Ireland has remained high over recent weeks as investors remain concerned about the final cost of Ireland's banking crisis, while they are also worried about the country's public finances.
Finance Minister Brian Lenihan said the Barclays report had said the Government was taking the right steps and had no difficulty in funding itself, though it warned that we must be 'extremely careful' about how to proceed in the future.
He also said a rise in bond spreads was the normal trend ahead of an auction. The National Treasury Management Agency is aiming to raise between €1 billion and €1.5 billion in the auction of Government bonds next Tuesday.
The rise in borrowing costs has also affected Irish bank shares, with AIB falling more than 11% in Dublin and Bank of Ireland ending down more than 7%.
Meanwhile, an IMF spokesman told the Reuters news agency this afternoon it did not expect Ireland to need financial help from the fund.
Yesterday, Barclays Capital said the Government should look at doing a deal with bondholders in Anglo Irish Bank, including a form of debt-for-equity swap, in which those owed money by the bank would be offered a stake in the bank in return.
In a research note, Barclays said the high cost of fixing the banking system and the effect of a weak economy on bank's loans were unsettling bond markets.
The note said default was unlikely, and that Ireland did not need to draw on assistance from the joint EU-IMF fund set up earlier this year.
'Yet should further unexpected financial sector losses materialise or macro-economics conditions deteriorate beyond our baseline forecasts in the coming months, the government may need to seek outside help,' it added.
Barclays said the 'colossal' effort needed to tackle the public finances in the coming years leaves little room to deal with any further unexpected losses in the banks.