S&P takes MBIA and Ambac off credit watch...

free4440273

meaning their AAA status is assured (reinstated): Dow - not surprisingly - rallies +100 points. Start selling the news?:think:

Cozworth806

Not totally out of the woods, but a bit of breathing space to refinance the insured debt.
Certainly boosted shares in financials lately.

Browntrout_2

Yes just shows what a house of cards exists out there, admit it how many people knew who or what the these companies do, I had no idea.

Apparently they provide insurance on all kinds of bonds, including mortgage backed securities, CDOs, SIVs whatever else.

So if you are an RBS or a Barclays and you have bought a pile of these products with a big fat yield then you can insure the yield to cover the income should the issuers fail to pay.

However if MBIA or AMBAC were to be downgraded then anything they have insured would have to be revalued leading to further writedowns (note not writeoff).

free4440273

free4440273 wrote: »

meaning their AAA status is assured (reinstated): Dow - not surprisingly - rallies +100 points. Start selling the news?:think:

Not quite yet: Dow up another 114 points:eek:.

Reestit_Mutton

A couple of points...

(1) Who exactly has given the monoline insurers their AAA rating? Is it not the same people who over-rated all manner of dodgy mortgage backed bonds and whose inadequacy in their role is currently being called into question?

(2) It's not just a further write-down of assets that the market is worried about...should the monoline insurers have lost their rating then the rating of the securities that they were insuring would also suffer, leading to a mandatory sell-off of the affected bonds by the pension funds (arguably one of the largest investors in the market) - this alone would have a serious negative effect.

RM