A sharp fall in Portugal’s borrowing costs has taken them closer to those of exemplary Ireland than of struggling Greece, but bond prices show investors remain sceptical it will be able to avoid a second bailout.

EUROPE’S bailout fund for Ireland and Portugal is losing its appeal as a bond issuer after investors ordered about €4.5 billion of its €3bn of notes compared with demand of nine times that on its first deal a year ago.

IRELAND’S top AAA credit rating was lowered one level by Fitch Ratings last night, the second reduction in two weeks, after global financial turmoil fuelled a surge in borrowing costs and swelled the budget deficit.