Bond insurers feeling effects of subprime mortgage sector developments - S&P |
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Published
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Tue, 30 Oct 2007 06:29
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MUMBAI (Thomson Financial) - Standard & Poor's Ratings Services said the concerns over potential subprime mortgage losses are shaping the bond insurance industry's operating environment both for better and worse.In a report, the ratings agency said despite positive development in premium rates and business economics in the asset-backed sector, a re-pricing of risk has not occurred in the public finance sector, with spreads remaining tight.Citing the dramatic widening of the credit spreads, S&P said some companies' third-quarter generally accepted accounting principles (GAAP) net income has been very depressed due to the marking to market of credit default swaps.S&P added while this volatility is unpleasant, it still believes that financial guarantor requirements under FASB 133 do not reflect actual transaction economics, as the bond insurers do not trade the swaps and the marks will zero out over time for the large majority of transactions, with their strong underlying credit quality ultimately yielding no claim.tfn.newsdesk@thomson.comnet/manCOPYRIGHTCopyright Thomson Financial News Limited 2007. All rights reserved.The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
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