MBIA and Ambac, the two biggest bond insurers in the US, are facing severe trouble amidst the dying down of the credit market storm. Although the tension in the credit market seems to be easing, with the Libor returning to the calm level, the insurers who backed the problematic bonds including those subprime mortgage-backed bonds are far from seeing the coast. Rating agencies had already warned that the triple-A rating of the insurers, which was the most important foundation to make the business model work, may be downgraded. With the share prices already slumped in recent months, it is not out of imagination these insurers may well be sunk in the murky water. And to make things worse, the sinking of the insurers will exert further stress on the contracting corporate bond market. We may well find more wrecks along the shoreline beside the aground MBIA and Ambac.

Well, touch wood.  

Saskia Scholtes, “Confusion increases over fate of MBIA and Ambac”, Financial Times, 19 Jan 2008, <http://www.ft.com/cms/s/0/4977267c-c634-11dc-8378-0000779fd2ac.html>