SHARE prices in Dublin soared for the second successive day and by the close the market had reached another new high with signs that prices can move higher next week. And on the gilt market, close on £1 billion worth of stock was traded for the second time this week, as investors took the view that monetary union will go ahead on time. This so called "convergence trading", where the yield gap between Irish gilts and German gilts has progressively narrowed, has been the dominant feature on the gilt market.

An almost total shortage of offers, the end of the quarter and the strength of the bond market have been the main factors driving share prices ahead for the past few days. But some dealers have expressed some surprise at the sustained strength of the market. Some other dealers believe, however, that with end quarter portfolios now closed off, next week's trading may see some profit taking and the market may drift off the current all time high.

The strength of international and domestic markets was the main factor driving financial shares ahead earlier in the week, but the main focus yesterday was on industrial shares, with dealers reporting huge interest in CRH, Greencore Kerry Avonmore. Second line financials like Irish Permanent and Woodchester were also in heavy demand. The two big banking stocks AIB and Bank of Ireland were up only marginally on the day.

The supply of CRH shares has been very tight since the recent placing and the share dealt up 9p to 635p while Kerry jumped 25p on shortage of stock. Kerry has flatly denied rumours that it has put its Bakers Aid subsidiary in the US back on the market.

Greencore jumped 16p to 355p in strong trading. The share is likely to benefit from a bumper beet harvest, both in terms of volumes and beet yields. It is also benefiting from improved world sugar and malt prices.

Woodchester gained 4p to 195p on renewed speculation that the Credit Lyonnais (CL) 53 per cent stake may be sold. Dealers believe that any sale of the CL stake and a subsequent mandatory bid is unlikely to be less than 2.5 times book value - 250p a share.

Bond markets surged upwards yesterday as the financial community becomes convinced that monetary union will go ahead on time. The move also puts downward pressure on Irish interest rates.

Turnover in the Irish bond markets was close to £1 billion yesterday, for the second time this week and the yield (interest rate) on Irish Government debt is getting closer to German levels.

The difference between Irish and German long term interest rates is now less that one percentage point for the first time since the currency crisis. Other peripheral European economies like Italy, Spain and Denmark are also seeing a huge surge in interest in their bond markets.

Mr Vincent Dack, head of Treasury at BNP in Dublin, said the financial community has woken up over the past two weeks to the fact that EMU is a "done deal". When the common European currency is introduced in 1999, interest rates across the EU will be the same, so the differential now is a huge opportunity to make money.

Foreign institutions, particularly European based funds are now pouring money into Ireland in what they see as almost a one way bet. Domestic Irish institutions have been more reluctant. Traders said they only started to buy in the last couple of days but there were very few sellers so prices were marked up substantially.

Contrary to expectations the National Treasury Management Agency failed to take advantage of all the foreign interest to raise further funds from the markets. Analysts said the agency is now so well funded that it is worried that raising any further money could actually increase overall debt levels, perhaps risking breaching the Maastricht Treaty conditions on debt levels.

The Italian Budget yesterday is also increasing speculation that Italy could even be in the first wave of countries joining monetary union, Mr Dack said: "The budget, which made cuts of 62 trillion lire rather than 32 trillion lire, and talk of assets sales has forced a rethink on the Italians credentials and their bond market has performed tremendously as a result."

Mr Han de Jong, chief economists at Goodbody Stockbrokers, stressed that the money coming into Dublin was broadly based. "Everyone is jumping on the bandwagon," he said.

He added that a consolidation must come sometime soon. The Irish market has done so well over the last three weeks it will have to take a break. But he added that rates could come back another tenth of a point to 0.8 of a point above Germany before consolidation.