Bond rates rose to euroera record levels of 7.8 per cent yesterday and the country must carry out a large bond auction next month.

But a successful bond auction lifted banks, insurers and fund mangers.

A bond auction this month will help to show whether investors think he can do so.

Gilts recovered from earlier heavy losses to trade slightly lower after a fairly well-received bond auction boosted sentiment.

Below-forecast retail sales and a relief rally in the wake of a 2.5 billion 50-year bond auction enabled gilts to post gains across the board.