Irish nine-year bond yields dipped below 6% today, for the first time since the country entered an EU-IMF loan programme in October 2010.

The cost of borrowing for Ireland closed at 5.97% according to Bloomberg.

The development comes as the National Treasury Management Agency prepares to raise funds by selling bonds tailored for the pension industry next week.

Positive sentiment around Europe is helping the cost of borrowing for Ireland to decline.

Much of this sentiment is driven by hopes the European Central Bank will take steps to solve the euro crisis.

It has also been helped by the fact that Spain managed to borrow at slightly lower rates today. Interest rates for Italy have also dropped.

All of this has helped Ireland as the NTMA prepares for it third attempt to borrow from private investors in recent months.

But since the euro zone crisis began hopes of a solution have frequently been dashed following inaction by authorities in Europe.

NTMA may issue first amortising bonds this week

The debt management agency will issue sovereign amortising bonds for the first time this week and expects to raise upwards of €500m.

This is according to a story from Reuters, which quotes a source familiar with the transaction.

The National Treasury Management Agency said last month that it was preparing to launch the new bonds.

Together with another new instrument - inflation-linked bonds - it said it hoped to raise between €3-€5 billion over the next 18 months.

The fund raising will help the country further cut its post EU/IMF bailout borrowing requirements that were significantly trimmed when it sold new long-term government bonds for the first time since 2010 in July.

The NTMA will initially issue the amortising bonds, which are aimed at Irish-based pension funds, with maturities of between 15 and 35 years, the first time Irish bonds will be stretched out to such a duration.

Unlike traditional bonds which pay a coupon each year and a principal at maturity, the amortising bonds will make partial principal and interest payments of equal amounts every year over their lifetime, making them attractive to pension funds.

The NTMA has declined to comment further on the exact time frame of the first issuance. It pointed to yesterday's statement which said the agency had received investor enquiries and subject to market conditions, it would issue the new instrument "in the near future".

Spain pays sharply lower rates in bond auction

Spain paid sharply lower interest rates to raise €4.51 billion in a short-term debt auction today as speculation grows that the country will agree to take a bailout to help it manage its finances.

The Treasury said it sold €3.5 billion in 12-month bills at an average interest rate of 3.07% compared with 3.92% in the last such auction on July 17.

It sold €981m in 18-month bills at a yield of 3.33%, down from 4.24%.

Demand was almost double the amount offered in the 12-month bills and four times for the 18-month bills.

Spain's borrowing costs have fallen from unsustainable highs earlier this month after the country said it might seek international aid if the conditions are reasonable.

Investors had been demanding rates of up to and over 7% to lend the country 10-year money, a display of distrust of Spain's ability to manage its debt and deficit without outside help.

The Treasury will next test investor sentiment on August 28, when it auctions three- and six-month bills.

Greece, Ireland, Portugal and Cyprus have already had their economies bailed out but a full-blown sovereign rescue package for Spain, the euro zone's fourth largest economy, could rock the EU's financial system.

The speculation is therefore that Spain will seek a partial rescue.

Conservative Prime Minister Mariano Rajoy is pressing the European Central Bank to intervene in the secondary market to buy up its bonds, which would bring down their interest rates.

The ECB has intimated it will help Spain but only after it formally applies for a bailout, implying there will be strings attached.

Spain also wants the European Union to allow those of its banks worst stung by the collapse of the country's property sector to be able to get funds directly from the ECB and for these loans not to form part of the country's sovereign debt burden.

Spain has been granted a loan of up to €100 billion from its euro zone partners to help its troubled banks but it has yet to tap the fund.

On Friday, Rajoy's government is to approve a new law creating a "bad bank" that will pool much of the sector's soured investments, estimated to total some €200 billion.

The results of a comprehensive audit of all Spanish banks are expected next month.