PrefBlog

About a year ago, there were wild claims being made (e.g., Naked Capitalism) that grading US municipalities on a global scale would bring about Nirvana and the end of useless and expensive municipal bond insurance. It turns out – surprise, surprise – that despite the changes, there are still credit differences between municipalities and the weaker credits still need insurance to flog their bonds:

An early contender to replace them, Warren Buffett’s Berkshire Hathaway Assurance Corp., was downgraded to Aa1 by Moody’s Investors Service in April. The billionaire investor in February called tax-exempt bond guarantees “a dangerous business.” His firm insured $3.3 billion in issues last year, ranking third in the industry.

Buffett’s warning isn’t stopping Macquarie Group Ltd., Australia’s biggest securities firm, from backing a new guarantor: Municipal and Infrastructure Assurance Corp. plans to sell its first policy by July, said Richard E. Kolman, the New York-based startup’s executive vice chairman.

“It is surprising to find that municipal bond insurance is anything but moribund in the early going in 2009,” wrote Philip J. Fischer, a Merrill Lynch & Co. municipal strategist in New York, in an April 6 report.

The overall market price changes were minimal today, although volume continued strong. It was most interesting to see that FixedResets were shut out of the volume-leaders table … that hasn’t happened in a while!

This entry was posted on Monday, May 11th, 2009 at 8:26 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.