Insured, but non-rated municipal bonds

In the aftermath of the bond insurance meltdown investors found that many of their holdings did not have an underlying rating.  Most are small borrowings and in smaller, lower profile communities across the U.S. landscape.  Among them are some gems that are navigating the difficult waters of the great recession.  However, there are also some clunkers that have less flexibility or ability to manage their finances in these difficult times.  We pulled the lists of non-rated insured securities from CIFG, XLCA, AMBAC, MBIA and FGIC and have a few observations.  CIFG’s and XLCA’s non-rated portfolio were insured mainly in the primary market reflecting their market position at the time of insurance and many are “story” bonds.  MBIA’s non-rated bonds were insured in the secondary market, reflecting the company’s approach in the late 1990’s.  We provide a few sample publications for your download here.

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3 comments on “Insured, but non-rated municipal bonds

Joan Allman

I would pick a riskier credit and bond insuer such as XL but I am biased in favor of AMBAC.

Susan Scherer

Considering the degree of uncertainty associated with so many municipalities and revenue bonds across the U.S., I’d prefer to stay away from insured bonds and lean toward pre-re ETMs backed by Treasuries.

Roger Horn

Thanks for shining the light on some potentially excellent opportunities. So, from what I can tell, the bond insurers apparently did their own due diligence of these underlying bonds, and guaranteed issuances based on their own positive assessment of underlying investment grade credits. How would I know if the munis haven’t deteriorated?


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