Junior bondholders in Anglo Irish Bank will be offered as little as 25 cent in the euro for their bonds in a buyback plan expected to be announced this week, bond market sources believe.

Subordinated bondholders will be "singed, not burned", according to one source, when finance minister Brian Lenihan makes his long-awaited statement on the likely final cost of the Anglo bailout.

It is expected the bank will get the green light from the minister to negotiate burden-sharing with creditors holding €2.4bn of subordinated bonds. This is likely to entail a heavily discounted buyback which could reduce the state's bill.

Lenihan is expected, however, to draw a bright line separating subordinated debt from senior debt, regarded as akin to deposits in the capital structure. An attempt to get out of paying senior bondholders in full could present legal difficulties and sap market confidence in Ireland's willingness to live up to its loan obligations.

"I don't think there will be any problem burning subordinated bondholders," said John Finn, managing director of Treasury Solutions.

"In a normal market they'd have been gone two years ago. With senior debt [Lenihan] has a problem." Lenihan has been careful to say Ireland would not default on senior bonds, but has been conspicuously ambiguous regarding subordinated debt, leading the market to price in default.