CREDIT RATINGS AGENCY Standard & Poor’s has downgraded Portugal’s credit rating for a second time in a week, increasing pressure on the country as it strives to avoid a bailout.

Last Thursday, Portugal’s credit rating was downgraded two notches to BBB and put on watch for further downgrades.

Today, S&P said it had lowered the rating to within one notch of junk status and the agency cited Portugal’s high sovereign debt and poor growth prospects when describing the country’s outlook as “negative”.

Reuters reports that Portugal’s 10-year bond yields hit a new high of 8.18 per cent after news of today’s downgrade broke.

Portugal’s prime minister quit last week after the parliament defeated a budget containing a raft of austerity measures.

The Wall Street Journal reports that an election is likely to be called within days to allow the formation of a new government, however Jean Claude Trichet of the European Central Bank has already said that the introduction of the defeated austerity measures is crucial.

- Additional reporting by the AP