This stuff is like candy! Markets just can't get enough of the endless barrage of Cyprus-related headlines. It hearkens back to the heady days of Greece's Papandreou headlines with perhaps some Tsipras mixed in for good measure (Tsipras was the guy who said that Greece wanted to stay in the Eurozone, but would absolutely not partake in austerity. Fond Memories
). This time around the core story is the same, but the plot elements are slightly different. Instead of "austerity" the Eurozone seeks to impose bank levies which Dijsslebloum--recently anointed (or appointed if you prefer) as President of the Eurogroup--says are quote: "Inevitable." Ahhh! Nostalgia is in the air! The finality and certainty of Eurozone Finance ministers with exclusively academic backgrounds ostensibly deciding the fate of world, all the while enjoying no possible benefits from non-existent past precedent. Well, actually there is past precedent, but only inasmuch as such comments have tended to precede good viewing material for markets. Sometimes that's been insanely beneficial for rates, and other times, it's marked a turning point that takes rates higher. All we know is there's no other game in town at the moment (as long as you include Italy and Napolitano's potential announcement regarding government formation tomorrow) and it's made all the more exciting by the fact that even fewer onlookers--educated or otherwise--have much of a clue of what's going on in Cyprus than we did when it was Greece. Must be something to do with the language... All Greek to us, or something like that...
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Pricing as of 4:09 PM EST
Afternoon Reprice Alerts and Updates
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Bouncing Back On Dueling Headlines, Crowds Forming Outside Cypriot Banks
Not quite as fast as it had begun, the recent risk-on move that followed headlines suggesting an orderly break-up of Cyprus Popular Bank (also known as "Marfin") is now undone by conflicting headlines saying that the Cypriot Central Bank is denying those reports. Nonetheless, crowds are growing, both in size and distemper (see ZH's coverage of Cyp-Riots
), and bond markets are bouncing back in friendlier directions.
All of the above--as dramatic as it might sound--is not much reaching MBS Markets, where Fannie 3.0s have merely swing a tick or two in either direction. 10yr yields have ratcheted steadily lower to test 1.93 at the moment and equities are off their earlier highs.
Bond Markets Weaker After Cyprus Bank Headlines
MBS and Treasuries moved quickly, but moderately into weaker territory following Bloomberg headlines indicating that 'Cyprus Popular Bank' would be shut down and split into good/bad banks. Rather than serve to spook risk markets with a "bank shut-down," the fact that depositors are being quarantined by the split (and assets under €100 bln guaranteed) is seen as a net-positive for EU contagion.
The Euro moved quickly off it's lows with domestic equities and bond markets following. The moves have been moderate so far and MBS remains inside the morning's range with Fannie 3.0s still up 3 ticks at 102-24. 10's are in line with levels from earlier in the morning at 1.9407. No reprice risk on these headlines, but they are serving as a speedbump to further gains for now.
Live Chat Featured Comments
Brett Boyke : "just read that Popular Bank has only a few hours of liquidity left. Should be interesting after the $$ runs out"
Matthew Graham : "10's catching a bit of a bid after TIPS Auction"
Paul L. Martin : "Bernanke Saying He’s Dispensable Suggests Tenure Ending....feels no personal responsibility to stay on to unwind Fed Balance Sheet....just something else for MBS markets to digest...."
Victor Burek : "looks like riots might be beginning in cyprus, http://www.zerohedge.com/news/2013-03-21/cyp-riots-begin"
Brett Boyke : "from wiki - Cyprus Popular Bank (formerly known as Marfin Popular Bank) is the second largest banking group in Cyprus behind the Bank of Cyprus. Trading on the island as Laiki Bank (Laiki being the Greek word for Popular), as of September 2012 it holds a 16% share of the market in loans and a 14.4% share of deposits. It is 84% state owned since 30 June 2012. "
Victor Burek : "Local TV station CYBC reports that police in the Cyprus' capital are scuffling with protesters (including employees of Cyprus Popular Bank) outside the nation's parliament:"
Jeff Anderson : "How big of a bank is Cyprus Popular over there? 50% of their system? 10%? Is it like Bank of America or Bank of Southeast Rhode Island?"
Matthew Graham : "RTRS- CYPRUS CENTRAL BANK DENIES REPORTS CYPRUS POPULAR BANK CPBC.CY TO CLOSE DOWN "
Victor Burek : "that is supposedly plan C for Cyprus"
Victor Burek : "Nicosia plans to create a fund collateralized by state assets, possibly including natural gas revenues, church property and social security fund reserves. A proposal is due to be submitted to the House of Representatives on Thursday evening."
Matthew Graham : "RTRS - EURO ZONE FINANCE MINISTERS TO HOLD TELECONFERENCE ON CYPRUS AT 1800 GMT TODAY, WILL ISSUE STATEMENT AFTERWARDS - EUROGROUP HEAD "
Jason Anker : "think of it this way (keep in mind laws on this subject have changes recently in many paces) Can the bank FC on you if you are 1x30? 2x30? If they knew they'd be keeping 200k in equity becasue you have it then IF they could keep all the money what stops them from FC after only 1 late? There is no Fed law I know of that says after 3 lates you cannto FC but after 4 you can. "
Ira Selwin : "Royal PIA for them"
Ira Selwin : "You think banks want to have to foreclose and rent/sell properties?"
Jason Anker : "so this is both a state and federal issue - will see state by state differences apparently "
Victor Burek : "i agree, the bank in that example should be able to keep that profit if the grandma wasnt smart enough to sell the home first and she keep the profit"
Matthew Carver : "Jason, at the end ofthe day, we have the right to foreclose for default. you can argue the morals of it all day long"
Jason Anker : "our gov't wanted to remove the incentive to FC. WHat if home is worth 300k and grandam owes 30k, bank keeps the dif in FC? "
John Rodgers : "http://www.blogtalkradio.com/yourmilitarylife/2009/08/18/everything-you-need-to-know-about-va-home-loan-program"