Against this background, the a priori expectation would have been that a country with its own considerable banking and fiscal difficulties, and one that was already in an external assistance programme, would see its situation worsen. However, that is not what has happened to Ireland.
While market sentiment still remains fragile, and even allowing for the recent reversal in Irish bond yields, there has been an improvement in market perceptions of the risks associated with the Irish sovereign and the domestic banking sector since the summer.