Bond Outlook [by bridport & cie, February 27th 2008]
The scenario we spelt out last week of the splitting of the monoline insurers into two, with the municipal side maintaining its AAA rating and the corporate and asset-backed side being downgraded, is gradually unfolding. The implications for the corporate bonds remain as dire as we described last week, and there is a little more detail on how the vicious circle will develop. |
Just when we thought that the banks had done the right thing in bringing onto their balance sheets the special investment vehicles using CDOs to back commercial paper issued on behalf of corporate customers, a new three-letter abbreviation has raised its ugly head: the VIE or Variable Interest Entity. |
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