The 30 issuers whose insured bonds
are expected to be affected by the AGLN upgrade have an aggregate net par insured amount of USD12.5bn.
A CDS is a type of insurance contract in which the seller of the CDS promises to pay the buyer of the contract in the event of default on the firm's insured bonds
. So, a smaller spread means there is a lower perceived risk of default on the firm's bonds.
He noted that Wells Fargo Asset Management owns very little Puerto Rican debt, only some short-term insured bonds
In some cases, managers have increased portfolio allocations to Puerto Rico to as much as 10.3%, albeit primarily in insured bonds
and bonds backed by corporate obligors.
Assured, which insured bonds
sold in 1999, 2005 and 2008, paid bondholders $4.2 million.
Similarly, insurance can increase liquidity for insured bonds
by reducing the information risk faced by investors.
Demand for insured bonds
will likely continue, since retail buyers comprise more than one-third of the market and have a strong preference for insured issues.
McCue then examines the effects of insurance on the yields of tax-exempt hospital bonds, and considers the relationships of underlying ratings with differences in the yields on insured bonds
. Robert W.
(Circular letter 19, page 3) The Circular letter sets these "best practices" in seven areas; first, limitations on the writing of insurance by FGI's on pools of asset backed securities (ABS) that are comprised or include portions of other pools of ABS; second, credit protection for credit default swaps (CDS); third, limitations on the concentration of risk; fourth, extension of the requirement that at least 95% of an FGI's portfolio of insured bonds
be investment grade; fifth, a clear statement of the continuing obligation of FGI's to manage risk prudently; sixth, higher levels of paid-in capital and paid-in surplus; seventh, increased requirements for capital and contingency reserves.
Mr Haste also revealed that the group has no exposure to credit insured bonds
, US municipal bonds or US sub prime residential mortgage backed securities.
The group has no holdings in the troubled monoline insurers, nor has it got any exposure to investments like credit insured bonds
or US municipal bonds.
11, S&P reported that after concluding that the current ACA enhanced issue ratings may not adequately reflect the underlying credit characteristics of the bonds, it had suspended the rating of those ACA insured bonds
for which the issuer has not sought an S&P public underlying rating (SPUR).