Greece was downgraded close to default on Monday, sending 10-year bond yields near to fresh euro-era highs and prompting more worries over the health of the eurozone.

Standard & Poor's cut Greece's long-term sovereign credit rating three notches to triple C in a sign the rating agency thinks it will be forced to downgrade Athens to default as private creditors are likely to be involved in the country's next bail-out.

Greece is now the lowest-rated sovereign in the world, having fallen below Ecuador, Jamaica, Pakistan and Grenada.

S&P said: "In our view Greece is increasingly likely to restructure its debt in a manner that, under the conditions of any package of additional funding provided by Greece's official creditors, would result in one or more defaults under our criteria."

Greek 10-year bonds jumped over 17 per cent for the second time this year before closing at 16.97 per cent in response to the S&P move, which puts Athens only four notches above default.

Irish and Portuguese bond yields also came under pressure. Portuguese and Irish 10-year yields closed at euro-era highs of 10.66 per cent and 11.34 per cent respectively.

The Greek downgrade came as the eurozone's rescue fund prepares to launch its second bond issue this year, possibly as early as Tuesday, with strong demand expected to give the troubled currency club a vote of confidence.

Despite worries over the second bail-out of Greece and the rising cost of borrowing for peripheral bonds, investment funds and central banks in Europe, Asia and even possibly a handful of US funds are set to put in offers for the bonds.

One seniorbanker said of the EFSF bond: "We have had very good feedback from a wide variety of investors and central banks from around the globe. It shows that Europe is liked as one large entity, even if very few people want to buy peripheral debt. This bond is a great advert for creating a eurozone common bond and pushing ahead with more fiscal integration."