Finally. Standard & Poor’s downgraded monoline bond insurers MBIA (NYSE: MBI) and Ambac (NYSE: ABK) to AA from AAA on June 5. This seemingly went over as a nonevent on Wall St. yesterday and one has to wonder - Moody’s (NYSE: MCO) what are you waiting for now? The credibility of these ratings agencies is all be kaput. This will affect around $1 trillion in bonds.
In a feature today on the monoline insurance companies being “the next financial crisis” ABC News breaks down the current crisis hitting the monoline insurance industry. Complete with a section on “What is Bond Insurance” the piece actually does a good job laying out the issues and actors in a clear way.
Welcome to the new Monoline Insurance News blog. In this blog I hope to stay on top of and track issues key to the monoline insurance industry and the municipal bond market. A monoline insurer is simple a company that guarantees payment of a bond principal and interest when a issuer defaults. Mostly known in municipal bond markets, many municipalities have used the monolines to decrease the percentage on their issue, increase the credit ranking (AA, AAA etc). Some of the earliest and greatest monoline insurance companies are now in trouble. Most notably, the first monline, Ambac Financial (NYSE: ABK) and the other industry elder MBIA Insurance (NYSE: MBI).
Since the monolines are so important to the municipal bond industry, in which many Americans find tax-free security in their portfolios, I hope to pay special attention to this issue. Also, of course, this tends to be on everyone’s minds at the moment.
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