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UPDATE 1-S&P upgrades MBIA, Assured Guaranty

(Adds background on ratings moves)

NEW YORK, March 18 (Reuters) - Standard & Poor's upgraded bond insurer MBIA Inc on Tuesday, saying it expects the company to gain market share and resume its prior role as a strong player in guaranteeing U.S. municipal debt.

The agency raised MBIA's rating to A- from BBB and upgraded National Public Finance Guarantee Corp, the company's main unit for insuring municipal bonds, to AA- from A.

Both have a stable outlook, which S&P said reflects its expectation that National "will gain market acceptance and become a competitive financial guarantor."

Before the financial crisis, insured bonds made up about half of all new debt issuance. By buying insurance, municipalities could use the guaranteeing companies' top ratings to push their borrowing costs down.

When the companies' ratings were cut on exposure to risky mortgage-related debt, use of municipal bond insurance plummeted. In 2008 the amount of insured debt fell 64 percent.

In 2013, the amount of insured U.S. municipal bonds shrank to $12.08 billion, the smallest amount since the financial crisis, according to Thomson Reuters data.

S&P also raised the rating on bond insurer Assured Guaranty on Tuesday to AA from AA-, citing its strong competitive position relative to its peers.

Assured was the only bond insurer left standing after the crisis and remained the top municipal issuer in 2013 by backing $7.38 billion of debt in 466 deals, Thomson Reuters data shows.

But its market share shrank after Build America Mutual insured $4.44 billion of municipal bonds in 536 deals.

(Reporting By Lisa Lambert and Steven C. Johnson; Editing by Diane Craft)