This $353 million default on an insured bond
issue increased uncertainty in the municipal bond markets and caused insurers to tighten their bond quality underwriting standards for healthcare issues (Carpenter et al.
Interest savings can be determined by subtracting the average yield for a bond for a given credit rating and maturity from that of an insured bond
of the same maturity.
The underlying probability of default on insured bond
issues does not go away with the purchase of complete insurance coverage -- it simple shifts to the insurer who has its own default risk.
It has also foraged in the realm of double-A rated bonds, which are one rank below triple-A and produce lower premiums than the typical insured bond
, which is in the range of single-A to triple-B.
I think that the premium is large for an insured bond
,'' said William Fitzgerald, a portfolio manager at John Nuveen & Co.
Financial guaranty insurance provides investors with the assurance of timely payment of interest and principal in the event an insured bond
The outlook for the company remains very favorable as growing infrastructure needs continue to fuel strong growth in both municipal bond issuance and insured bond
Sellers said, "In the 20-year history of the bond insurance industry, no monoline financial guaranty insurance company has been downgraded, no insured issue has been downgraded, and no insured bond
investor has failed to receive an insured bond
These funds include: the Nuveen California Tax-Free Bond Fund -- Special Bond and Insured Bond
Portfolios; the Nuveen Tax-Free Bond Fund -- Massachusetts, New York and Ohio Portfolios; and the Nuveen Insured Tax-Free Bond Fund -- Massachusetts and New York Portfolios.
While insured bonds
accounted for more than half of the market in 2005, just 4 percent of muni issues were insured in the first half of 2012.
The Index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds
, and pre-refunded bonds.
The new policy offers issuers the ability to achieve higher foreign currency ratings from ratings agencies on the insured bonds