ANOTHER SLIDE IN THE CREDIT MARKETS

The ABX.HE indexes track how much it costs to insure a securitized debt that is based upon home mortgage loans against default. The greater the decline in the graphs below, the more it costs to insure. It costs more to insure because few want to guarantee collaterized securities. The costs have risen markedly for all types of debts, AAA to BBB-. Data from Markit:

The companies that have been selling the insurance may soon take big hits and perhaps fold:

MBIA, Ambac Losses Will Be `Massive,' Egan Jones Says (Update1)

By Christine Richard

Nov. 6 (Bloomberg) -- Bond insurers including MBIA Inc., Ambac Financial Group Inc. and ACA Capital Holdings Inc. face ``massive losses'' over the next few quarters that could test their ability to raise new capital, Egan-Jones Ratings Co. said.

MBIA may lose $20.2 billion on guarantees and securities holdings, Sean Egan, managing director of Egan-Jones, said on a conference call today. ACA Capital may take losses of at least $10 billion; New York-based Ambac may reach $4.3 billion; mortgage insurers MGIC Investment Corp. and Radian Group Inc. may see losses of $7.25 billion and $7.2 billion, respectively, Egan said.

``There is little doubt that the credit and bond insurers face massive losses over the next few quarters and many will be capital challenged,'' Egan said.

The Egan Jones loss estimates include existing guarantees, mainly on securities that rely on mortgages for repayment, and on securities holdings, he said. Haverford, Pennsylvania-based Egan Jones is paid by investors to rate debt, rather than by issuers.

Morgan Stanley analyst Ken Zerbe in a Nov. 2 report downgraded the financial guarantee industry to ``in-line'' from ``attractive,'' and questioned whether bond insurers will be able to survive mounting losses on CDOs and other mortgage-related securities that the companies guarantee.