Moody's said that its ratings outlook for the financialguarantors' industry is stable for the next 12-to-18 months, but "anumber of factors continue to create a challenging operatingenvironment for the industry as a whole."

At the same time, Moody's said in its report--"Global FinancialGuaranty Insurance Industry Outlook"--that looking beyond thecurrent "challenging operating environment," emerging structuraltrends affecting the world's financial markets "are likely toprovide substantial opportunities for the guarantors over themedium to long term." Financial guarantors underwrite municipalbonds and other credit facilities.

James Eck, vice president and senior analyst, said in astatement, "These opportunities are expected to arise fromincreased financial disintermediation globally," as well as growinginstitutional demand for low-risk securities and the pendingimplementation of Basel II. Basel II is an international agreementon capital adequacy among banking supervisors.