Ireland's cost of borrowing continues to rise today. The interest rate demanded by investors to lend money to Ireland for ten years stood at 8.95% this evening.
The spread between Irish and German government bonds also set new highs for the eighth trading day in a row, hitting over 600 basis points.
Meanwhile, clearing house LCH.Clearnet said it was hiking margin requirements for Irish debt. After warning last week that it may ask traders to deposit more cash to trade in Irish sovereign bonds, the London-based group confirmed it was increasing the margin required to trade Irish bonds by 15% from tomorrow.
LCH.Clearnet said last month that it had introduced a new policy that would allow it to request an extra 15% margin from members in the event that the yield on a European government bond exceeded 450 basis points.
Irish Government bonds broke that threshold on October 29 and has continued an upward trend since, nearing almost 600 basis points today.
'I'd be surprised if any change in the Irish Government bond yield is attributable to our decision because we informed members of our approach a month ago,' John Burke, the head of fixed income at LCH Clearnet, told Reuters today.
'The key thing is that the market continues to function properly and that firms can continue to deal with government bonds,' he added.
Lenihan insists we won't have to use EU bailout fund
Finance Minister Brian Lenihan has insisted that Ireland has not lost its sovereignty and will not have to resort to the European Union's bank bailout fund.
In an interview on BBC's Newsnight programme last night, Mr Lenihan said Ireland would return to the markets next year and intended to fund itself.
'We have put our public finances on a sustainable basis in the last two years, we have done massive corrections in our public debt, in our deficits and we will continue to do so,' Mr Lenihan said.
Asked why markets did not believe in Ireland, Mr Lenihan said the Government is taking steps to resolve difficulties both in the banking and public finance side.
He said that Ireland has 'a strong under-lying economy - we are paying our way in the world, unlike some of e other sovereigns that have difficulties in Europe.'
On the recent increase in the bonds markets, Mr Lenihan said 'it is entirely caused by the fact that doubt has been cast in certain European states about whether peripheral European states will be able to repay their sovereign debts.'
Mr Lenihan rejected the suggestion that the crisis is a result of his incompetence.
'I've been Minister for Finance here since 2008, dealing with these problems, tackling them on a daily basis, and making considerable progress in that regard,' he said.
The Minister also said the economic problems were not due to the bank bailout but rather because of 'the very wide gap between public expenditure and public receipts'.
The Minister said that the country's workforce of 1.9 million people had shown 'huge adaptability in the present crisis'. He said that tax receipts went back to 2003 levels and they will have to increase and augment them to 2005-2006 levels and adjust expenditure the same way.
He said that Ireland had not lost sovereignty. 'Ireland has always been linked to a fixed currency arrangement. We are currently linked to the euro, we were linked with sterling for more than 150 years,' he said.
'Small countries don't have the luxury of having a separate currency, they link themselves to another currency, there's nothing unusual about that,' he added.
