Volatility on bond markets is expected to continue despite a reduction in the price being charged to buy Spanish and Italian debt.
The European Central Bank's decision to buy the two countries' bonds brought some stability to the bond markets today.
This evening, the yield, the interest rate demanded by investors, on the Italian 10-year government bond was 5.34%, down sharply from 6.189% on Friday evening. The Spanish 10-year bond was at 5.2% from 6.271%. Yields on Irish bonds were also lower, with the 10-year yield at just over 10.1%.
The scale of the ECB intervention will not be known until next Monday, however, with the bank only releasing information on its bond holdings once a week.
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Investors will now be watching to see if parliaments in the 17-member euro zone quickly vote through plans to allow their bail-out fund to buy debt too - obviating the need for the ECB to do it.
There also remain real concerns that euro zone leaders are not doing enough to tackle the crisis by either dramatically increasing the bail-out fund or replacing national bonds with eurobonds.
But such moves would have significant financial consequences for taxpayers in fiscally conservative countries like Germany, the Netherlands, Austria and Finland. This morning, leading members of German Chancellor Angela Merkel's party called for a special conference to be held before any further significant decisions are taken on Europe's finances.
Finance Minister Michael Noonan told RTE radio the ECB intervention seemed to be working, as Italy and Spain were now well out of what he called 'bail-out territory'. Mr Noonan said there was very little impact on Ireland so far, but the Government was closely monitoring the situation.
He said Ireland was reasonably well positioned, following recent EU decisions, including the cut in the interest rate on Ireland's emergency loan, but we could be dragged into difficulties by external forces.
In its statement, the ECB governing council welcomed additional steps by Rome and Madrid and said it considered the 'decisive and swift implementation by both governments as essential in order to substantially enhance the competitiveness and flexibility of their economies, and to rapidly reduce public deficits.'
It also stressed the 'decisive importance' of each government's declared intention 'to fully honour their own individual sovereign signature as a key element in ensuring financial stability in the euro area as a whole.'
That meant governments had pledged to honour their debts and not consider default as a way of resolving debt problems. Given those conditions, along with decisions taken at an emergency July 21 euro zone summit, 'the ECB will actively implement its Securities Markets Programme', which purchases bonds issued by euro zone governments on secondary markets.
Italian Prime Minister Silvio Berlusconi has vowed that lawmakers would push through additional austerity measures, including a constitutional amendment to force governments to keep balanced budgets.
Spain announced new reforms to bring in an additional €4.9 billion and help curb its public deficit.
The moves were aimed at demonstrating to financial markets that the two crucial euro zone economies were serious about getting on top of their respective problems.
Italian government faces criticism over deal
Italy's opposition has accused Prime Minister Silvio Berlusconi of surrendering sovereignty to the European Central Bank after he pledged to speed up reforms in return for help in facing a debt crisis.
The ECB agreed on Sunday to buy Italian and Spanish bonds to calm markets. Berlusconi had agreed late on Friday to bring forward the government's target of balancing the budget by a year to 2013, following pressure from the ECB.
Antonio Di Pietro, head of the opposition Italy of Values party, said Berlusconi had been 'dragged by the ear by the EU and international economic institutions' to the news conference where the measures were announced.
Criticism from opposition parties and unions reflects broad concern about the apparent deal between the ECB and the government, suggesting growing political resistance.
The Corriere della Sera newspaper said that the ECB demands for accelerated reforms were contained in a letter President Jean-Claude Trichet and Bank of Italy Governor Mario Draghi had written to Berlusconi.
Mario Monti, a former European Commissioner widely seen as a potential head of a so-called 'technical government' of experts which some opposition parties want to replace Berlusconi's struggling centre-right coalition, said the government had effectively ceded power.
