Fitch Solutions: Puerto Rico Concerns Drive Out Assured & MBIA CDS
NEW YORK -- July 10, 2014
Ongoing news over Puerto Rico's debt woes are leading to wider credit default
swap (CDS) spreads for two of the largest monoline insurers, according to the
latest CDS case study from Fitch Solutions.
Five-year CDS on Assured Guaranty Municipal Corporation (66%) and MBIA, Inc.
(73%) have widened notably in recent weeks. Additionally, CDS liquidity for
both Assured and MBIA remains high, currently in the third and fifth global
'Souring market sentiment for Assured and MBIA is likely attributed to
concerns over Puerto Rico's debt, to which both insurers have considerable
exposure,' said Director Diana Allmendinger. 'A new law enacted by the Puerto
Rican government essentially removes government support for the commonwealth's
public corporations and allows them to restructure debt, which may at least
partially explain the CDS widening for both monolines.'
Fitch Solutions case studies build on data from its CDS Pricing Service and
proprietary quantitative models, including CDS Implied Ratings. These credit
risk indicators are designed to provide real-time, market-based views of
creditworthiness. As such, they can and often do reflect more short term
market views on factors such as currencies, seasonal market effects and
short-term technical influences. This is in contrast to Fitch Ratings' Issuer
Default Ratings (IDRs), which are based on forward-looking fundamental credit
analysis over an extended period of time.
Additional information about Fitch Solutions' products is available in the
Fitch Solutions, a division of the Fitch Group, focuses on the development of
fixed-income products and services, bringing to market a wide range of data,
analytical tools and related services. The division is also the distribution
channel for Fitch Ratings content.
Fitch Ratings and Fitch Solutions are part of the Fitch Group, a jointly-owned
subsidiary of Fimalac, S.A. and Hearst Corporation. For additional
information, please visit 'www.fitchsolutions.com'; 'www.fitchratings.com';
'www.fimalac.com' and 'www.hearst.com'.
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