Rating moves on monolines and US financiers continue

Offshore, S&P affirmed the 'AA' financial strength rating assigned to the monoline insurers, Ambac Assurance Corp and MBIA Insurance Corp, and removed the ratings from CreditWatch Negative. The outlook on the ratings is negative reflecting S&P's view that their franchises have been damaged by exposure to subprime mortgages and related CDOs of ABS. As a result, both are likely to face diminished new business flow.  

Following the positive rating actions by S&P and Moody's the week before, Fitch Ratings placed its 'CCC' insurer financial strength rating assigned to Syncora Guarantee Inc. (formerly XL Capital Assurance Inc.), on Rating Watch Positive, moving from Rating Watch Evolving. Fitch observed that the settlement of various hedge transactions, ultimately with Merrill Lynch, has positive implications for Syncora's financial and capital position and Syncora's rating could be significantly upgraded upon a full assessment of the remaining insured portfolio.

Moody's lowered its long term rating on Morgan Stanley to 'A1' from 'Aa3', concluding a review for possible downgrade commenced at the end of June. The outlook is stable. Morgan Stanley's risk appetite and risk management mistakes resulted in operating performance below Moody's expectations.

Moody's also concluded its review of CIT Group, commenced at the end of May, affirming the 'Baa1/P-2' ratings but adding a negative outlook. Moody's noted that CIT has made important strides in improving its operating flexibility and building liquidity.