"TO BE HONEST, it scares the hell out of me." The American bond fund manager had never had to think much about MBIA's credit. The ratings agencies did this for him and for many others. So when the financial guarantor's credit spread almost doubled in April, following an earnings restatement, the shock spread around the global bond markets. The ratings agencies quickly reaffirmed their AAAs on MBIA and its spreads began to narrow back again. Are investors' concerns now allayed? Apparently not. "It does concern me," says Joe Biernat, director of European Credit Management, a specialist independent credit fund manager set up in 1999. "As a credit investor, we don't usually buy AAA paper. But our ABS fund started holding cash in MBIA-wrapped bonds about six months ago. The whole point of doing so was that we wouldn't have anything to worry about. Now it's on our radar." European Credit has sought a better understanding of MBIA. "We've had meetings with management and they assure us that there's nothing to the rumours. They tell a very credible story. But from the outside, there's no way to analyse these insurance companies.
