Monday, January 21, 2008
Municipal borrowers in the US are increasingly issuing bonds without seeking guarantees from beleaguered insurers MBIA and Ambac, highlighting the risks of a collapse of their bond insurance business model unless confidence is restored. So far in January, US municipalities borrowed $8.6bn through new bonds guaranteed by insurers, according to Thomson Financial. This compares to over $31bn of new guaranteed bonds issued in January of 2007. About 30 per cent of the new bonds this month were guaranteed by FSA, a bond insurer with little exposure to subprime assets which have created losses for MBIA and Ambac and eaten into their capital base.