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Shares in troubled lender Northern Rock slumped to a historic low this morning, before bouncing back in later trading.

During early trading the value of stock in the Newcastle-based bank dropped to as low as 112p, but Northern Rock shares later clawed back six per cent of their price on rumours that a rescue package for the lender may emerge.

According to the Reuters news agency traders believe a Northern Rock rescue package of 175 pence a share may be on the cards, amid speculation that venture capitalists are due to meet this afternoon to discuss a possible move.

Earlier, Northern Rock shares had dived further after a report that a potential Spanish businessman was no longer interested in buying a stake in the beleaguered home-loans provider.

Yesterday Northern Rock's share price slumped by 26 per cent, a fall prompted by fresh concerns that the beleaguered bank could be sold off at a heavy discount.

The Sunday Telegraph claimed in an unconfirmed report that two US hedge funds had been given permission by the Treasury to begin takeover talks with Northern Rock.

Both JC Flowers and Cerberus met with a Treasury official to discuss their separate plans for a possible deal, the paper reported.

Last week Northern Rock confirmed that it was in "preliminary discussions with selected parties" over its future.

However with a buyer for Northern Rock yet to emerge, small shareholders are understood to be against a swift sale of the lender on the grounds that they could face further losses as a result.

Shares in the mortgage provider are now worth more than 75 per cent less than they were when it emerged that Northern Rock had asked the Bank of England to provide it with emergency funding last month.

The plea was made due to liquidity problems faced by Northern Rock in the wake of an ongoing global credit crunch, caused by rising default levels in the US sub-prime mortgage market.

Meanwhile the UK's banks have again shunned the Bank of England's offer of £10 billion worth of additional funds in response to the credit squeeze.

At an auction today not one bank made a bid for the cash, which the central bank has offered to pump into the longer-term money markets in order to ease the strain on lenders.

It follows the failure of any bank to request access to the money at a previous auction last week, with analysts saying that the penalty interest rate charged on the cash is too high to tempt lenders.