Standard & Poor’s joined Fitch on Thursday in downgrading FGIC, the world’s fourth-largest bond insurer, or monoline.
Going a step further, they’ve now also put MBIA on negative rating watch – regarded by many as a signal for an all but inevitable downgrade on Friday or early next week. Which means MBIA is now on negative watch at the two biggest rating agencies.
And yet, on a conference call on Thursday, MBIA CFO Chuck Chaplin was at pains to emphasise there wasn’t a danger of insolvency for the company.
The market seems to have bought his version of events, MBIA’s shareprice rallied from $11.80 to a closing price of $15.50.
That, despite the fact that Bill Ackman of Pershing Square released the model on which he has based his highly-successful monoline shorting strategy. FT Alphaville has links to the model, and a copy of his letter to US regulatory authorities here.
Add to that, too, the fact that both S&P and Moody’s have/will downgrade RMBS and CDOs even further.
Hard to know whether to laugh or cry.