Relief as Ireland raises €1.5bn

Ireland attracted strong investor demand in a closely watched bond auction yesterday, raising €1.5bn (£1.3bn), the top end of its target range, and easing some of the tension surrounding its financial health.

The successful sale of the paper, due to mature in 2014 and 2018, helped to narrow the premium investors demand to hold Irish bonds over German Bunds to 402 bps and was a welcome relief for the Irish Prime Minister Brian Cowen, pictured, who has faced calls to resign this week. The premium hit a record 425bps on Monday.

But the yield – at 6.002 per cent on the 2018 bonds – was 1 percentage point above levels seen in previous sales, and analysts said the country would not be able to sustain such high borrowing costs.

Ireland has sold enough debt to fund it into next year, but concerns remain about its ability to wrestle down the worst deficit in the EU.