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will the juniors suffer more if the credit crisis worsens, even though gold may moonshot?

S&P downgrades Ambac, MBIA

Another day, another selloff for Ambac (ABK) and MBIA (MBI). The bond insurers sold off anew Thursday afternoon after S&P cut its insurer financial strength ratings on the companies’ main insurance units to double-A from triple-A. The news came a day after Moody’s said a downgrade of Ambac and MBIA was “likely.” Shares fell more than 6% after dropping more than 15% Wednesday.

“The rating actions on the companies reflect our belief that these entities will face diminished public finance and structured finance new business flow and declining financial flexibility,” S&P wrote. “In addition, we believe continuing deterioration in key areas of the U.S. residential mortgage sector
and related CDO structures will place increasing pressure on capital adequacy. The ‘AA’ financial strength ratings of these companies are supported by currently sound claims paying ability and liquidity levels in our opinion.”

On Wednesday, the companies responded to Moody’s review announcement within minutes, with Ambac pronouncing itself “disappointed” and MBIA saying it “disagreed.” Presumably we can expect more of the same this afternoon.