Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of bond insurer Assured Guaranty
So what: In a case where less bad news is good news, Standard & Poor's yesterday lowered its credit rating on Assured Guaranty by two notches, to AA- from AA+. Standard & Poor's reasoning for downgrading Assured Guaranty's credit rating included a lack of adequate capital given new restrictions in place regarding the avoidance of large obligator concentrations. Now for that good news: Standard & Poor's kept the company's credit rating in the AA investment-grade range, which is seen as a major victory in a sector that has seen Ambac go belly up and MBIA
Now what: I wouldn't read too much into yesterday's S&P credit downgrade, as Ambac and MBIA were both AAA-rated at one point and fell to junk status. Assured Guaranty has a considerably stronger history of profitability than either of those two and, according to S&P, should hold a stable outlook as long as it continues to insure investment-grade municipal bonds. In short, this downgrade shouldn't change your investment thesis on Assured Guaranty despite the wild price vacillations.
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