SHARES IN Anglo Irish Bank jumped again yesterday, rising 12.7 per cent to €6.45, bringing the bank's gain over the past two days to 27 per cent.

The increase in the share price has been attributed to an element of "short covering" where investors buy stock to cover bets made on the share price falling.

Anglo Irish Bank's gain compares with a 19 per cent rise in Irish Life & Permanent (IL&P) over the two days, 14 per cent for AIB and 13 per cent for Bank of Ireland. Anglo's shares have returned to a price near their June 27th level though the stock is still down 41 per cent this year.

Sebastian Orsi, analyst at stockbrokers Merrion Capital, said Anglo's shares were becoming harder to borrow, which has raised the cost of shorting stock where investors sell borrowed shares in anticipation of buying them back at a cheaper price.

He said there was also more positive sentiment towards bank shares.

Anna Lalor, analyst at Goodbody Stockbrokers, also reported that Anglo's stock had become harder to borrow to short.

The decision by businessman Seán Quinn to convert his interest in Anglo from contracts for difference (CFD) derivative products into a shareholding of almost 15 per cent is thought to be taking a large amount of Anglo's shares out of the hands of short sellers.

Underlying shares on CFD positions can be loaned out to short.

Share price rises over the past month have caught out short investors in a so-called "short squeeze", forcing them to buy shares.