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Bond markets are taking it calmly

THE bond markets reacted with indifference yesterday to the collapse of the coalition over the weekend, signalling that investors still expect the Finance Bill to be passed before the election.

There was no rush for pension funds and other investors to ditch Irish bonds and the interest charged remained stable.

"There's a general conviction that whoever is in charge in Ireland will abide by the agreements set out with the EU and the IMF.

"There's a consensus view within Ireland that something has to be done, that there needs to be an austerity policy," said Kornelius Purps, a strategist at Unicredit in Munich.

The response in the markets was a continuation of last week's trading when Irish bonds generally moved in tandem with international events rather than events closer to home. This suggests most dealers believe an early election won't derail the €85bn bailout plan.

Austin Hughes, chief economist at Dublin-based KBC bank, said the markets were reassured by the bailout plan. "The markets may actually be marginally reassured that there is the lending programme in place from the EU and IMF. In the absence of that, it would be a very tall order for the NTMA (Ireland's debt agency) to go to the bond markets."

Traders in shares also appeared unfazed. The ISEQ Overall, which tracks the country's largest shares, jumped 1.7pc to close at 2893.37-- close to levels last seen in August.

Irish Independent