ONE OF THE CHIEF STRATEGISTS at Goldman Sachs has said that European bond markets – which have seen the cost of Irish, Portuguese and Greece bonds skyrocket this week – would be calmed if the European Financial Stability Fund was to announce a bailout for Ireland and Portugal.

Francesco Garzarelli, the chief interest rate strategist at the group’s London offices, wrote that his firm believed the likelihood of Ireland and Portugal entering an IMF- designed adjustment program funded by the EFSF has, in our view, increased.”

Unlike in the aftermath of the Greek bailout in April, where the country was forced to borrow from Europe as the price of its own borrowing became sustainably high, however, the group believes that such an action would have a calming effect this time.

Greek bonds had traded above 7% when the bailout was agreed in April, compared to the 8.6% barrier being approached by Irish bonds this afternoon.

“Unlike in the aftermath of the Greek ‘bailout’,” Garzarelli wrote, “we are of the view that such an outcome will not lead to contagion.

“Rather, it may mark a resolution of ongoing European Monetary Union sovereign tensions.”

Portuguese bonds have also risen in recent days, though not by the same scale as Irish ones – Portugal today broke the 7% barrier on 10-year bonds for the first time, sending its spread versus similar German bonds to 4.66%.

The same spread for Irish-German bonds stood at a record 6.16% as of 3:30pm.

The Department of Finance this lunchtime offered no comment on rumours that the International Monetary Fund was preparing a bailout for Ireland.