by Calculated Risk on 3/24/2013 09:16:00 PM

Cyprus and the "troika" have reached a deal tonight. Reports are the euro zone finance ministers have also approved the plan. Preliminary reports are that there will be no tax on depositors, and apparently this means approval from the Cypriot Parliament is not required.

Update: Eurogroup statement: Eurogroup Statement on Cyprus

A few details from CyprusMail: Bailout deal reached

Deposits below 100,000 euros in Laiki will be transferred to Bank of Cyprus. Deposits above 100,000 euros, which under EU law are not insured, will be frozen and will be used to resolve debt. It remains unclear how large the writedown on those funds will be. Some reports suggested it might be as high as 40 per cent. Sources told Reuters that the proposal involved shifting deposits below 100,000 euros from the Popular Bank of Cyprus (also known as Laiki) to the Bank of Cyprus to create a "good bank".

Monday economic releases:
• At 8:30 AM ET, Chicago Fed National Activity Index for February. This is a composite index of other data.

• At 10:30 AM, Dallas Fed Manufacturing Survey for March. The consensus is an increase to 3.4 from 2.2 in February (above zero is expansion).

• At 1:15 PM, Speech by Fed Chairman Ben Bernanke, Monetary Policy and the Global Economy, At the London School of Economics and Political Science, London, United Kingdom

Weekend:
• Summary for Week Ending March 22nd
• Schedule for Week of March 24th

The Asian markets opened green tonight with the Nikkei up 1.4%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are up 8 and Dow futures are up 70 (fair value).

Oil prices are up with WTI futures at $94.02 per barrel and Brent at $107.95 per barrel.

by Calculated Risk on 3/24/2013 08:10:00 PM

From CNBC: Cyprus, European Union Reach Draft Bailout Deal

Cyprus and its international lenders have reached a draft deal to rescue Cyprus, sources told CNBC.

No levy will be imposed on any deposits in Cypriot banks, but there will be a 'bail in' of Laiki depositors.

From the Peter Spiegel of the Financial Times:

All Laiki deposits over €100k will be whacked. Total of haircut at BoC has not been decided.

The Eurogroup still needs to meet, and then the Cyprus Parliament.

Update: CyprusMail: Bailout deal reached

Acting president Yiannakis Omirou has confirmed that a deal has been struck between Cyprus and international lenders.

Government sources suggest that the deal provides for a 30 per cent haircut on deposits of over €100,000 at Bank of Cyprus while reports said Popular Bank would be resolved.

Laiki deposits under 100,000 will be transferred to a ‘good bank,’ reports said.

by Calculated Risk on 3/24/2013 02:05:00 PM

By request, here is an update to a graph that I've been posting for several years.  This shows single family housing starts (through February 2013) and the unemployment rate (inverted) also through February. Note: there are many other factors impacting unemployment, but housing is a key sector.

You can see both the correlation and the lag. The lag is usually about 12 to 18 months, with peak correlation at a lag of 16 months for single unit starts. The 2001 recession was a business investment led recession, and the pattern didn't hold.

Housing starts (blue) increased a little in 2009 with the homebuyer tax credit - and then declined again - but mostly starts moved sideways for two and a half years and only started increasing steadily near the end of 2011. This was one of the reasons the unemployment rate remained elevated.

Click on graph for larger image.

Usually near the end of a recession, residential investment (RI) picks up as the Fed lowers interest rates. This leads to job creation and also additional household formation - and that leads to even more demand for housing units - and more jobs, and more households - a virtuous cycle that usually helps the economy recover.  However this time, with the huge overhang of existing housing units, this key sector didn't participate for an extended period. 

The good news is single family starts have been increasing steadily for over a year, and that should mean more construction employment this year, and that the unemployment rate should decline further in 2013.

by Calculated Risk on 3/24/2013 09:50:00 AM

Updates at 1:45 PM ET: Meeting now scheduled for 3 PM ET. Cyprus central bank is now limiting cash withdrawals to 100 euros per day.

Cypriot President Nicos Anastasiades is in Brussels to hold talks with the "troika" and the Eurogroup meeting is scheduled to start at 1700 GMT (1 PM ET). Of course these meetings always start and run late ...

From the NY Times: As Deadline Nears, Cyprus Scrambles to Devise a Bailout

The Cypriot president, Nicos Anastasiades, flew to Brussels on Sunday after mapping out a tentative outline of a deal late Saturday with representatives of the troika of negotiators involved in the bailout: the European Central Bank, the European Commission and the International Monetary Fund.

His first order of business was a meeting with Mario Draghi, the president of the central bank; Christine Lagarde, the managing director of the monetary fund; and José Manuel Barroso, the president of the commission. Herman Van Rompuy, the president of the European Council, which represents European Union leaders, was expected to preside over the meeting.

Mr. Anastasiades had also briefed Cypriot political leaders on the outline...

The revised bailout terms now under discussion would assess a one-time tax of 20 percent on deposits above 100,000 euros at one of the nation’s biggest banks, the Bank of Cyprus, which has the largest number of savings accounts on the island. ...

A separate tax of 4 percent would be assessed on uninsured deposits at all other banks, including the 26 foreign banks that operate in Cyprus.

Under the plan, savings under 100,000 euros would not be touched ...

From the CyprusMail: Cyprus seeks 11th-hour deal to avert financial collapse

Without a deal on Monday, the ECB says it will cut off emergency funds to Cypriot banks, spelling certain collapse and potentially pushing the country out of the euro zone.

Finance Ministers of the 17-nation euro zone will meet at 1700 GMT Sunday. ...
A senior Cypriot official said Nicosia had agreed with its lenders on a 20 per cent levy over and above €100,000 at the island's largest lender, Bank of Cyprus, and four per cent on deposits above the same level at other banks.

Media reports suggested talks were stuck on a demand by the IMF that Bank of Cyprus absorb the good assets of competitor Popular Bank and take on its nine billion euro debt to the central bank as well.

by Calculated Risk on 3/23/2013 05:32:00 PM

Here is the unofficial problem bank list for Mar 22, 2013.

Changes and comments from surferdude808:

As expected, a quiet week as there were only four removals from the Unofficial Problem Bank List. The removals leave the list at 797 institutions with assets of $294.3 billion. The list has not been under 800 since Friday, July 23, 2010. A year ago, the list held 949 institutions with assets of $379.8 billion.

Actions were terminated against Saehan Bank, Los Angeles, CA ($602 million Ticker: SAEB); CIBM Bank, Champaign, IL ($471 million Ticker: CIBH); Bank of Little Rock, Little Rock, AR ($193 million); and Bank VI, Salina, KS ($65 million). In a more rare event, the Federal Reserve terminated a Prompt Corrective Action order against Bank of Bartlett, Bartlett, TN ($370 million).

Next week, we anticipate the FDIC will release its enforcement action through February 2013.

Earlier:
• Summary for Week Ending March 22nd
• Schedule for Week of March 24th