The credit ratings of Spain and Cyprus have been cut by rating agency Moody's, according to BBC News.

The move follows a 100bn-euro ($126bn; £81bn) bailout of Spain's banks by fellow eurozone countries agreed over the weekend. Cyprus is expected to seek its own bailout in the coming days.

Spain's government faces its highest borrowing costs in debt markets since joining the euro, as lenders fear for the country's future in the eurozone.

Spain's rating was cut three notches, from A3 to Baa3 - one notch above junk.

Cyprus' rating fell two notches, from Ba1 to Ba3, pushing it deeper into junk status.

Moody's said the ratings may be downgraded again after it concludes a review of Spain's creditworthiness within the next three months.

Many investors are restricted from investing in debts that are given a junk rating, implying that any further downgrade is likely to make it even harder for Spain to borrow.

Moody's has previously indicated that it will consider cutting the credit ratings of all eurozone governments including top AAA-rated Germany if it believes there is a material increase in the risk that Greece may be forced out of the eurozone.