Anglo Irish fears escalate

 
City A.M. Reporter
IRELAND’S borrowing costs hit a record high yesterday after two credit rating agencies warned its debt is at risk of further downgrades, compounding political jitters over a budget that could break a shaky government.

The anxiety was sparked by warnings from ratings agency Standard & Poor’s that if government support for Anglo Irish Bank, set to be unveiled tomorrow, was more than €35bn (£30bn), the country would face another downgrade on its debt rating.

Rival ratings agency Fitch was also cautious. “I cannot pretend that the current rating is totally secure,” Chris Pryce, a senior analyst with Fitch, said.

The premium investors demand to hold 10-year Irish government bonds rather than benchmark German bunds hit a euro lifetime high of 475 basis points yesterday, meaning it costs Dublin some 4.75 percentage points more than Berlin to borrow funds.

And the cost of insuring Irish sovereign debt against default soared to a record 519 bps from 488.5 at Monday’s New York close, according to data monitor CMA.

The Irish government yesterday confirmed that it will do “whatever it takes” to support the Irish financial industry.