Mr Rajoy said he hopes the measures planned, including the sacking of Mr Puigdemont's government and curtailment of the Catalan parliament's powers, will be brief.

Portuguese debt led a rally in eurozone peripheral bonds after S&P Global Ratings raised the country’s credit rating to investment grade.

Irish home repossessions will rise as banks show “improved willingness” to reduce the worst of their non-performing mortgage loans on their books, according to credit rating firm DBRS.

Portugal’s bonds rose the most since June after the country’s finance chief said that rating company DBRS has a positive assessment of the nation’s fiscal efforts, strengthening the government’s conviction that it will keep its investment-grade rating.

Italy’s highest court gave the green light to a referendum that Prime Minister Matteo Renzi says will guarantee political stability and on which he has staked his future.

Irish elections will soon loom large for investors as political uncertainty yesterday helped send the borrowing costs of Portugal and Spain significantly higher.

Credit ratings agency Moody’s has tonight announced its decision to revise its outlook for Ireland from stable to positive.

Most top credit rating agencies say they would not cut Greece’s rating to default if it misses a payment to the IMF or ECB, a stance that could keep vital ECB funding flowing into the financial system. 

Revenues and margins at Europe’s big three credit rating agencies are back to pre-financial crisis levels and the trio are in line for more business, despite a welter of new rules aimed at reducing their influence, a regulator said on Monday.

DBRS, the world’s fourth-largest credit rating company, has agreed to be acquired by the Carlyle Group and Warburg Pincus for about $500m (€409m).

Finance Minister Michael Noonan has said if Permanent TSB Group Holdings, the 99.2% government- owned lender, needs to raise capital after European stress tests this month, it can do so in the markets and not upset state finances.

Bank of Ireland could go to the market as early as today with a seven-year covered bond.

IRISH bond yields shot back up yesterday, to their highest level in more than three months — another knock-on effect of investor uncertainty over a solution to the eurozone debt crisis being found.

BROKERS have called the move by ratings agency Moody’s to cut Ireland’s credit rating to junk as “cynical and manipulative”.

IRELAND could face a further downgrade from Standard & Poor’s (S&P) as the ratings agency expects the country to inject as much as €35 billion into Anglo Irish Bank “over time”.

Ireland's international credit rating has been downgraded again by the Standard and Poor's ratings agency.

Ratings agency Standard & Poors (S&P) tonight revealed it has downgraded Ireland's credit rating, blaming the cost of shoring up the country's troubled banking sector.