Banks, Financial

Banking app targets millennials who want help budgeting

Graduate debt, rent and high living costs have made it hard for millennials to save for a house, a pension or even a holiday. For Ollie Purdue, a 23-year-old law graduate, this was reason enough to launch Loot, a banking app targeted at tech-dependent 20-somethings who want help to manage their money and avoid falling […]

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Eurozone inflation climbs to highest since April 2014

A welcome dose of good news before next week’s big European Central Bank meeting. Year on year inflation in the eurozone has climbed to its best rate since April 2014 this month, accelerating to 0.6 per cent from 0.5 per cent on the back of the rising cost of services and the fading effect of […]

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Wealth manager Brewin Dolphin hit by restructuring costs

Profits at wealth manager Brewin Dolphin were hit by restructuring costs as the company continued to shift its focus towards portfolio management. The FTSE 250 company reported pre-tax profits of £50.1m in the year to September 30, down 17.9 per cent from £61m the previous year. Finance director Andrew Westenberger said its 2015 figure was […]

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Travis Perkins and Polymetal to lose out in FTSE 100 reshuffle

Builders’ merchant Travis Perkins and mining company Polymetal face relegation from the FTSE 100 after their recent performances were hit by political events. The share price of Travis Perkins has dropped 29 per cent since the UK voted to leave the EU in June, as economic uncertainty has sparked concerns among some investors about the […]

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RBS share drop accelerates on stress test flop

Stressed. Shares in Royal Bank of Scotland have accelerated their losses this morning, falling over 4.5 per cent after the state-backed lender came in bottom of the heap in the Bank of England’s latest stress tests. RBS failed the toughest ever stress tests carried out by the BoE, with results this morning showing the lender’s […]

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Categorized | Capital Markets, Insurance

MBIA: new wrapping

Posted on March 26, 2014

Does time heal all wounds? A half-decade after MBIA and fellow bond insurers rocked the US municipal bond market after buckling under risky mortgage debt that they had also guaranteed, MBIA is poised to start insuring “munis” anew. Standard & Poor’s recently raised its rating on MBIA’s US muni insurance arm, National Public Finance Guarantee, to double A minus from single A, enabling it to charge enough in premiums to make substantial new business worthwhile. It has done a handful of new deals of late. MBIA has made big strides cleaning up its mortgage mess and split the troubled structured finance business from the healthy muni one. But will the muni market embrace insurance again?

    Pre-crisis, 50 to 60 per cent of muni bond issuance was insured – and some investors simply outsourced the credit work. Last year, the share was 3.2 per cent, according to Municipal Market Advisors. There were nine active insurers in 2007, versus just Assured Guaranty and new entry, Build America Mutual, in 2013 after most insurers collapsed.

    There are other impediments. With interest rates low, investors have valued the yield that comes with risk more than the safety of insurance. After insurers’ disastrous turn in the crisis, many investors have been less inclined to trust the insurance enough to forgo their own analysis of the issuer. For those doing that work, there is little point to buying bond insurance.

    As rates rise, the economics of bond insurance make more sense. And distressed situations such as Detroit and Puerto Rico may remind investors of the value of insurance, though they will simultaneously test the model – both MBIA and Assured have about $5bn of exposure to Puerto Rico. Bond insurance is likely to become more popular. But it is unlikely to regain the dominance it once had. That is a relic of the past.

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