Exit polls from Ireland's big election show the ruling party Fiana Fail is definitely out.

Fine Gael is set to win without a majority. The most likely outcome is a coalition between Fine Gael and Labor, according to TheJournal.ie.

Both Fine Gael and Labor campaigned under promises to renegotiate debt with a haircut for bondholders.

However, that doesn't mean a haircut will happen. Morgan Stanley's Elga Bartsch said in a note Thursday:

Haircuts on senior bank debt still unlikely

In their election manifestos, Fine Gael and Labour state that they would aim to force bond-holders to share the costs of recapitalizing troubled financial institutions. However, we believe that unilateral action against senior unsecured bank debt is unlikely given the strong resistance from the European Commission and the ECB. Instead, we think the spectre of haircutting senior bank debt will likely be used to secure additional assistance in supporting the Irish banking system.

The yield on Irish 10-year bonds ended Thursday within five basis point of record highs.