THIS WEEK IN THE MARKET

WHAT a week! Unprecedented levels of trading in Government bonds continued with little sign of slackening, while the stock market surged to record levels as investors bid for stock.

It remains to be seen how much further bond and stock markets can rise, but the convergence argument is still attracting investors who believe that Irish bond prices will have to eventually rise to German bund levels if Ireland is in the first wave into EMU.

The level of activity on the Irish bond market has been quite extraordinary, with turnover of more than £1 billion now almost a daily occurrence.

This has resulted in bond yields plunging continuously and a fundamental shift in the structure of the bond market, with overseas investors now holding over 40 per cent of Irish Government paper - when they traditionally have held around 30 per cent.

Market-makers believe that overseas investors have bought in excess of £1.5 billion worth of Irish bonds in the space of a month.

The same market-makers are also clapping themselves on the backs on how they have coped with the unprecedented turnover in Government bonds.

Business may have been hectic, but most of the market-makers seems to have called the market right and done very well in the past month on their own-account trading. As one market-maker put it: "We may be tired but we're happy."

The boom in bond markets inevitably fed through to the stock market where yield-sensitive financial stocks in particular, became the focus of attention. Industrial shares were also firmer but most of the turnover was concentrated on the financials, especially Irish Life.

With a value of more than £20 billion, the Irish market is up more than 20 per cent on the year and existing ISEQ end-year forecasts of around 2,700 may have to be revised upwards.

At some stage, investors are going to begin taking profits from the market, but most will be wary of selling, given that it will be very expensive to buy back into the market if it keeps rising. At least one Dublin investment house is thought to be seriously underweight in Irish equities - just as the market is roaring away from them.

Company news, meanwhile, was a bit thin on the ground, with only results from Ardagh, a placing by Aminex and an acquisition cum placing by Dunloe House featuring. Next week, however, will see Independent's bid for the outstanding shares in Wilson & Horton formally begin while Lyons Irish Holdings will release its results on Tuesday.

Meanwhile, those who run the Irish Stock Exchange must be happy that they don't have to deal with the Pan Andean situation. Events in London reawakened memories of some of the less savoury dealings involving Irish exploration companies in the past where the punter was the one to suffer.

Pan Andean may be quoted in London but it is an Irish-registered company and the alleged insider dealing ahead of last week's drilling announcement does little to enhance the image of the exploration sector.