When the bank goes bust - no bailout! - how would the bond holders 'lose nothing' (they would, and should, lose everything)? I'm not quite sure I understand you correctly.
The bank's business model: Offer interest on deposits/investments waaay above what others offer. Ooops, that didn't work ---> bust! Now why should anyone else (the taxpayers of those countries that finance the bailout - mostly small savers themselves) be on the hook for those that played a risky game (high interest = high risk)? The Cypriot local savers with their small deposits are insured anyway. The high rollers shouldn't reap the benefit if all goes well and be able to pass off a loss to others if it doesn't. IMHO.
What I read last night about the deal was that the bondholders were going to lose nothing. Today in the news it says they are going to lose money as well. I’m not a proponent of bailouts, the situation as I understood it has changed.
They need to raise 5.9 billion euros to receive 10 billion euros in bailout money. I think this EU experiment will not end well. It’s just a matter of how long will kick the can be played.