Irish and Portuguese government bonds were in the firing line Tuesday despite Dublin's agreeing to seek a bailout from the EU and IMF, with an accord increasingly seen as unlikely to resolve eurozone problems.
As its bonds came under fresh pressure, Irish banking stocks tumbled in Dublin, with dealers saying recent developments have done little to clarify either their future or that of the broader eurozone.
In midday trade, the yield -- the rate of return earned by investors -- on the benchmark Irish 10-year government bond jumped to 8.024 per cent from 7.869 per cent late Monday.
On the Portuguese bond, the yield rose to 6.636 per cent from 6.523 per cent.
"The market is not saying 'we have put out a local crisis which threatened to spread to other countries;' it is saying 'who's next,'" commented Rene Defossez, bond strategist at Natixis.
"Clearly Portugal is in a difficult enough position given the feeble progress made on reducing its budget deficit," Defossez said.
Among other, weaker eurozone countries seen to be at risk, the yield on Spanish 10-year bonds rose to 4.817 per cent from 4.735 per cent on Monday.
For Greece, bailed out with a 110-billion-euro ($150-billion) rescue package in May, the yield rose to 11.735 per cent from 11.702 per cent.
Defossez said that while the emergency fund put in place by the EU and International Monetary Fund in the fallout from the Greek crisis might be adequate to bail out the smaller eurozone countries "it will most certainly be insufficient in case there is a major problem at one of the larger countries."
Meanwhile in Dublin, bank shares collapsed, losing even more ground as the coalition government imploded, jeopardising the prospective EU-IMF rescue.
In afternoon trade, the Bank of Ireland, seen to be one of the stronger of the remaining lenders, lost nearly 25 per cent to 0.29 euros and Allied Irish Banks was off more than 14 per cent at 0.35 euros.
Irish Life & Permanent lost 5.71 per cent to 79.2 cents.
The three stocks lost 19, 6.0 and 30 per cent respectively on Monday.
Dealers said investors were losing faith in Ireland's beleaguered banking sector which the government has tried to keep afloat with billions of euros of extra cash.
The bailout in turn crippled the state's finances, forcing Dublin to seek external help.
"The perceived political risk has clearly risen while comments from Irish authorities ... about 'overcapitalising' the banks to restore confidence leave investors concerned about the potential level of dilution," Emer Lang, an analyst at Davy stockbrokers told AFP.
As much as 30 billion euros may be handed to the struggling Irish lenders under an EU-IMF bailout package worth up to 90 billion euros while they will undergo new stress tests.
Ireland's economy has been hammered by the international financial crisis and its banking sector has been badly hit by years of reckless lending that has now been exposed by the collapse of a domestic property bubble.
Meanwhile Tuesday, one of Ireland's opposition parties tabled a motion of no confidence in Prime Minister Brian Cowen, demanding he quit over the planned bailout.