This development takes the bond insurers out of the headlights for now, although Moody’s still rates MBIA as having a negative outlook. Credit default swaps on the monoline have fallen 240 basis points to 615, according to Bloomberg.
Note also that the rating agency is cool on the idea of a split.
Moody’s Investors Service on Tuesday ended its immediate threat to cut the top “Aaa” rating of MBIA Inc.’s insurance unit, citing the company’s efforts to strengthen its capital.
But downgrades are still possible especially if the company splits its business lines, Moody’s said…..Any plans to split the company’s municipal bond and structured finance business would increase the risk of a downgrade for the non-municipal business, Moody’s said. The action on Tuesday did not reflect a possible split of MBIA’s business, Moody’s said.