Investors penalised Citigroup in its $4bn (€2.7bn) bond sale yesterday, the first since it disclosed almost $17bn of losses from mortgage-linked investments earlier this month, by demanding the highest yields relative to benchmark interest rates the bank has ever paid for 10-year money.

Bank of America, JP Morgan and Citigroup have successfully raised over $6bn of fresh capital in the bond markets despite facing higher costs of funding as investors demand higher yields following a series of multi-billion dollar writedowns in the banking sector.