FINANCIAL shares recovered a little of their lost ground on the Irish market yesterday as US bond prices began to pick up in the late afternoon.

However, traders said continuing nervousness kept volumes quite low.

Both AIB and Bank of Ireland first traded up substantially from Tuesday's close. However, traders said this was most likely the result of a "bed and breakfast" deal where the shares were sold yesterday with a guarantee to buy them back at the same price today so as to crystallise a capital gain.

AIB ended up 5p at 320p share while Bank of Ireland closed 5p higher at 415p. Irish Permanent failed to claw back its losses. It finished down 9p at 370p.

Volume was high in CRH, where 800,000 shares changed hands in London, dealers said. CRH put on 3 7/8p to 534 7/8p.

There was very little activity in second line stocks. But an announcement that Mr Hugh Friel, finance director at Kerry Group, had bought 20,000 shares at 530p encouraged others into the stock. "It's not a bad vote of confidence in his company," one dealer said. Kerry added 3 1/4p to 533 1/4p.

Independent Newspapers lost 6 1/4p to 445p.

Smurfit saw heavy volume on selling from the US. Having last traded on London at 163p sterling it opened in Dublin at 158p and picked up in late trade to 159 1/2p.

Traders said they are looking ahead to the Bundesbank Central Council meeting today, where some still think a small rate cut may be announced. "The Bundesbank likes to surprise the market and a cut would do just that," one trader said.

Irish consumer prices are due to be released tomorrow as well as money supply figures in Britain.

Bonds had a "bumpy" day, traders said. The US long bond tested 6.70 per cent but fell back to 6.66 per cent by the close of Irish trade.

Traders said that Europe is not convinced by any recovery in the US. "Everyone is still very nervous and the markets are turbulent," one trader said.