In the late hours of Monday morning, Cyprus agreed to the outlines of an aid package, paving the way for 10 billion euros ($13B) of emergency loans to stave off the threat of default. The accord imposes losses that two European Union officials said would be no more than 40% on uninsured depositors at Bank of Cyprus Plc, the largest bank, which will take over the viable assets of Cyprus Popular Bank Pcl, the second-biggest, which will be wound down. Europe’s stock market rallied on Monday and early Monday bolstered US stocks for a better open at 9:30. The Cyprus solution is the first time since the credit and debt crisis began in Greece in 2009 that bank depositors and stockholders are being forced to take losses – all shareholders and bond holders in the Cyprus Popular Bank that will be closed. The deal will undoubtedly bring into focus the safety of deposits and bonds issued by other banks in the larger countries in the EU that are still facing debt issues (Italy, Spain, Portugal).
The week has a number of key economic report headliners: February durable goods orders, February new home sales, the final Q4 GDP, and February personal income and spending. Treasury will auction $99B of notes this week beginning Tuesday through Thursday. Today Ben Bernanke is scheduled to discuss with IMF Chief Economist Olivier Blanchard lessons from the crisis with BOE Gov. Mervyn King at the London School of Economics.