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In keeping with Halloween, here's a scary one

The Irish Government has taken a three-month holiday from borrowing, instead running down reserves of cash borrowed earlier in the year. The four-year plan, due in about two weeks, and the Budget on December 7, are just preludes to the main event -- the re-entry of the Irish Government into the bond market in the New Year.

The €1.5bn not borrowed in October plus the €1.5bn not borrowed in November represent borrowing postponed, not borrowing avoided. The decision to exit the market for a while was taken because the market had turned against Ireland, with interest rates on the benchmark 10-year bond moving above six per cent. But the cash reserves are finite and will run low in the Spring of 2011 unless Ireland re-enters the market with a pretty big issue.

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