EU ministers this morning approved a deal reached by Cyprus with international bailout negotiators, that should be enough to unlock a €10bn EU bailout and save the country from bankruptcy. The agreement will see depositors with accounts worth less than €100,000 protected. But those above those levels in Laiki Bank, the second largest and most troubled financial institution, would be severely cut and the losses on large deposits in Bank of Cyprus, which will survive as a much smaller entity, are also yet to be decided, but could be as high as 40 per cent. The eurogroup agreement will come as a relief, since rescue deals struck by the Troika have been unpicked by ministers in the past. (Financial Times)
Financial stocks led Asian markets higher on news of the Cyprus deal. The Nikkei was 1.9% higher, the Kospi 1.4% and the Hang Seng rose 0.6%. The MSCI Asia Pacific was 0.9% higher. However analysts expect the rally to be short-lived as the EU still faces a lot of work to hammer out the specifics of the financial aid. (Financial Times)(Bloomberg)
Bankers' pay premium narrowing: "Investment bankers still get paid much more than other professionals, including doctors and engineers, but for the first time in a generation, the gap is narrowing." The multiple they receive of average private sector pay has fallen from 9.5 times in 2006 to 5.8 times last year, according to research compiled by PwC for the FT. (Financial Times)
England and Wales house prices posted their biggest month-on-month gain in three years in March, driven by London, a survey by Hometrack showed. Prices rose 0.3% from February, the fastest increase since March 2010. In year-on-year terms house prices were flat, the first time they have not fallen since September 2010. (Reuters)
Plan to crack down on banks' capital regulation arbitrage: A plan for hefty charges on banks that use pricey CDS to cut their capital requirements outlined in a highly technical consultation announced on Friday by the Basel Committee on Banking Supervision takes aim at banks that have been exploiting a regulatory loophole by buying credit protection on risky loans but deferring or spreading out the premiums for several years. (Financial Times)
Markets expect Chinese easing cycle to end: "China's swap market is signaling interest-rate increases for the first time since 2011 after inflation accelerated to a 10-month high and the housing market defied government cooling efforts. Two-year contracts that exchange the People's Bank of China's 3% savings benchmark for a fixed payment rose eight basis points this month to 3.03%, data compiled by Bloomberg show." (Bloomberg)
US Congress reviews tax break for corporate interest payments: Kenny Marchant, a Texas Republican, and Jim McDermott, a Democrat from Washington state, leaders a working group on "debt, equity and capital" in the House of Representatives ways and means committee, the powerful tax-writing panel, are evaluating a move that would reduce the tax code's bias towards debt and encourage equity funding instead. The Senate finance committee is also exploring limiting the interest payment deductions, aides said. (Financial Times)
Dell evaluating alternative offers: "A special committee of Dell's board is evaluating separate takeover proposals from Blackstone Group and billionaire investor Carl Icahn to decide whether either or both are likely to trump an existing $24.4 billion take-private deal, a source familiar with the discussions said on Sunday." Icahn offered $15 per share for 58% of Dell, while Blackstone proposed paying more than $14.25 per share, the source said. Both offers would leave some Dell stock publicly traded, in contrast to the Silver Lake group deal already agreed, which would see all of Dell bought for $13.65 per share.(Reuters)
Xi to focus on trade in Africa speech: Chinese president Xi Jinping's speech in Dar es Salaam today, on his first overseas trip as president, is expected to focus on trade relations in a move to ease local fears China was in Africa purely for its resources. (Reuters)
COMMENT AND CURIOS:
- European bankers pursue Russians preparing to quit Cyprus. (Financial Times)
- The meaningless Cypriot natural gas numbers. (Reuters)
- Gavyn Davies: The four precedents set by Cyprus. (Financial Times)
- Wolfgang Münchau: Cyprus fiasco an illustration of eurozone's failure at collective action. (Financial Times)
- Morgan Keegan case signals more scrutiny of fund directors. (Wall Street Journal)
- Senior CMBS investors face missed payments. (Financial Times)
OVERNIGHT MARKETS: UP
Asian markets
Nikkei 225 up +229.93 (+1.86%) at 12,568
Topix up +12.05 (+1.16%) at 1,051
Hang Seng up +140.21 (+0.63%) at 22,256
US markets
S&P 500 up +11.09 (+0.72%) at 1,557
DJIA up +90.54 (+0.63%) at 14,512
Nasdaq up +22.40 (+0.70%) at 3,245
European markets
Eurofirst 300 down -1.28 (-0.11%) at 1,189
FTSE100 up +4.21 (+0.07%) at 6,393
CAC 40 down -4.56 (-0.12%) at 3,770
Dax down -21.16 (-0.27%) at 7,911
Currencies
€/$ 1.30 (1.30)
$/¥ 94.86 (94.49)
£/$ 1.52 (1.52)
Commodities ($)
Brent Crude (ICE) up +0.59 at 108.25
Light Crude (Nymex) up +0.48 at 94.19
100 Oz Gold (Comex) up +1.60 at 1,608
Copper (Comex) unchanged 0.00 at 345.40
10-year government bond yields (%)
US 1.97%
UK 1.85%
Germany 1.38%
CDS (closing levels)
Markit iTraxx SovX Western Europe +1.28bps at 101.83bp
Markit iTraxx Europe +0.01bps at 118.98bp
Markit iTraxx Xover -4.14bps at 473.48bp
Markit CDX IG -0.48bps at 90.58bp
Sources: FT, Bloomberg, Markit
