Investors attracted by Iceland's high yields face 'messy' election

Reykjavik

INVESTORS drawn to Iceland's high yields following the partial dismantling of capital controls are facing parliamentary elections that could produce a toxic mix of political turmoil and radicalism.

Klaus Spoeri, a fund manager at Frankfurt-Trust, says that while he recently bought more Icelandic bonds because of their attractive yields of more than 5 per cent, he's now holding off. "We're quite confident about Iceland and the turnaround," Mr Spoeri said. But if Saturday's elections should "go wrong, we'll liquidate the position". Despite an impressive turnaround in the economy, latest surveys suggest the ruling conservative coalition of the Independence and Progressive parties stands little chance of surviving the election.