Investors are beginning to worry about the status of AIB subordinated debt in the wake of the government's decision to force losses on Anglo Irish Bank and Irish Nationwide bondholders, according to market sources.

The development came as rumours swirled in the markets late last week that the European Central Bank had quietly bought Anglo's €4bn outstanding senior debt in a back-door bailout.

Anglo executives did not respond to requests for comment.

The confusion regarding the status of Anglo's debt in the past month has caused markets to worry that government strategies to deal with the bondholders of the nationalised bank will be applied to other institutions.

On Friday, Standard & Poor's slashed its ratings on the lower tier 2 subordinated debt of all Irish banks to junk status amid restructuring fears. Attention focused on AIB as the bank's credit rating was also cut to BBB+ due to its reliance on the state as it faces 90% nationalisation.

One bond analyst remarked that the government's efforts to draw a line in the sand clearly had not worked.

Meanwhile, Moody's threatened downgrade of Ireland's credit rating, due in January, could force the banks to take bigger haircuts on their Nama bonds when pledging them for cash with the ECB or other counterparties.