Skip to comments.Cyprus Bankruptcy? No Tsunami Waves Hitting The US Mortgage Market … Yet
Posted on 03/24/2013 9:17:12 AM PDT by whitedog57
High level meetings are happening among the Eurogroup leadership and Cyprus, according to ekathimerini.com. That is, Northern Europe wants to bail out Cyprus, but under pretty stiff conditions. Cyprus wants a bailout, but without any conditions. Russians want a bailout of Cyprus and its banks, but wants Northern Europe to pay for it.
Cyprus second largest bank has limited cash withdrawals to EU100 per customer.
March 24 (Bloomberg) Daily withdrawals at ATM machines of Cyprus Popular Bank are limited from today to EU100 per customer, the lenders spokesman Costas Archimandritis said in a telephone interview from Nicosia.
And the rumors of a Cyprus default (my personal favorite option) is increasing. You know it is possible when analysts calmly say it is controllable.
March 24 (Bloomberg) Euro area has the means to withstand possible Cyprus default, Lars Feld, member of panel of economic experts to the German government, tells Bild in an interview. Says bankruptcy has lost its terror: Bild Says situation would be fully controllable for the euro area: Bild Says a currency cant become an instrument of political blackmail, otherwise it very quickly becomes as soft as butter: Bild NOTE: Cyprus Says President to Meet Draghi, Lagarde in Brussels Today NSN
There appears to be market sentiment that a deal will be struck between Cyprus and Northern Europe on a bailout (after all, Cyprus IS in the Mediterranean Sea with all the other fun-loving, entitlement crazy PIGS). The 5 year Credit Default Swap (CDS) spikec at the initial news of the Troika Tax and the rejection by Cyprus Parliament, but has come down again yet.
On the other hand, the Cyprus internal bond has seen its yield spike and NOT come down.
And Russian financial stocks are experiencing a negative rotation. Apparently, some investors are not convinced of a low cost Cyprus bailout and avoidance of a deposit tax.
How is this impacting US mortgage rates? Since Northern Europe will move to contain yet another crisis, the impact so far has been minimal. The Bankrate 30 year fixed rate mortgage average has continued to rise in a relatively steady manner since December 2012.
And for you technical trading types, here is an Ichimoku Cloud analysis of the Bankrate 30 year average.
The retail mortgage spread over Fannies current coupon remains elevated since Fannie and Freddie went into conservatorship.
So, Cyprus is not really hitting the US mortgage market
so far. But lets see if a Cyprus default roils the financial markets.
If Cyprus appeases the EU community and gets the loan....it’ll be strictly the Russian billioniares who are harmed. My guess is that they will have a pay-back episode, remove their money from the Greek side of Cyprus, and then determine the next best and safe location to place the money.
For those who haven’t grasped it...the Russians went to Cyprus because they just didn’t trust their own banks. This massive dumping of capital into a little banking atmosphere...probably wasn’t very bright, and it shows the lack of planning on the side of the Russian billionaires.
As for the little guy in Cyprus? He’ll survive intact...minus some money here and there. The day to day purchases of gas and groceries will get back to normal. And the EU will stand there and worry about Cyprus ever paying them back. Oh, and that pay-back thing....might include some political figures and bankers on the island. But it’s best we not discuss that issue.
Remember when they said a bailout for Greece would be a one time thing and fix everything?
What a joke.
There was an interview of a couple “little guy(s)” in Cyprus this morning on FOX news. They said exactly as you have said about them.
Is Cyprus the first or last domino to fall?
Only the news that the media, controlled by the government and Muslim money, deems worthy of affecting the markets will affect the markets. Half the U.S. could go up in smoke in a nuclear attack, but if the media doesn’t deem it to be worthy of affecting the economy or the markets, it won’t affect anything. This is the new paradigm under which we are living now.
I give up on predicting the EU. In 2008 I thought that a collapse was coming within a year, and that the EU would have to face reality.
Unfortunately I vastly underestimated the determination of the Brussels clique to cling to power. They’ve been defying gravity for years and will do their damnedest to keep going that way.
Of course, when it goes blow up I pity the fools who have to pay for their actions. Which will probably be everyone.