UPDATE 3-Moody’s cuts FGIC’s “AAA” insurer rating
By Dena Aubin
NEW YORK, Feb 14 (Reuters) - Moody’s Investors Service on
Thursday steeply cut its “AAA” ratings on FGIC Corp’s bond
insurance arm, making FGIC the first big bond insurer to lose
its top rating from all three major ratings agencies.
The action on FGIC, the fourth largest bond insurer, raised
fears among investors of even more write-downs at global banks
and could further drag down prices in the $2.5 trillion
municipal bond market.
Moody’s slashed its rating on FGIC by six notches, and
warned it may cut the rating again because of a $4 billion hole
in the insurer’s capital position.
S%26amp;P had cut FGIC’s rating to “AA” on Jan. 31, while Fitch
cut it to “AA” on Jan. 30.
“I think what this does most importantly is it further
diminishes liquidity in the marketplace,” said Andrew Harding,
chief investment officer for fixed income at Allegiant Asset
Management in Cleveland. “Therefore, all your credit spreads
and risk premiums increase and you are definitely seeing that
today.”
Moody’s, however, said the top two bond insurers, Ambac and
MBIA, have stronger capital positions and business franchises
than FGIC or Security Capital Assurance’s (SCA.N: Quote, Profile, Research) XL Capital
Assurance, which it downgraded on Feb. 7.
Shares of MBIA and Ambac surged after the Moody’s report,
with MBIA ending up 8.4 percent and Ambac closing up 12.4
percent.
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