Cautious Floating Bias

Stocks opened up being introduced to the tiny island of Cyprus, as the next surprise character in the Euro drama unfolded.  Cyprus is a small island in the Mediterranean Sea and is home to about 1.2 million people.  Their banks were in need of a bailout after losing on Greek debt, but the proposed terms for repayment are what spooked the population.  The Cypress government is voting on a 9.9% tax on bank deposits over $100,000 Euro’s and a 6.75% for deposits less than $100,000 Euro.  The banks are closed for a few days until the vote, but you can imagine there were a few people at the ATM machines.  This move is essentially the exact opposite of what the FDIC is supposed to do for banks here in the U.S.  The Dow opened close to 100 points lower, but has since regained almost all of the early losses.  mortgage bonds gapped up right to a resistance level, pushing interest rates slightly lower today.  The Fed starts their 2 day meeting tomorrow, with the announcement of any change in monetary policy on Wednesday.  While no one expects any change, it will be all about the tone of the future outlook that moves markets.  We will advise a very cautious floating bias.