The shares of MBIA Inc. (MBI: sentiment, chart, options) spiked sharply higher out of the gate this morning, thanks to some positive news for the battered bond insurer. The company announced late Wednesday that it will reinsure a $184-billion portfolio of U.S. public finance bonds insured by Financial Guaranty Insurance Co. As part of the deal, MBIA will pay a ceding fee of $197 million and receive approximately $741 million in unearned premiums.

New York Insurance Superintendent Eric Dinallo, whose office provided oversight and approval for the deal, called the agreement an "exceptionally positive outcome... It should provide substantial improvement for everyone -- the municipal and structured policyholders of FGIC, the policyholders of MBIA and both companies."

In the first 10 minutes of trading, MBI galloped to a 20% gain at $14.43, and peeked above its 10-month moving average for the first time since October 2007. The stock has plenty of sideline cash to fuel a serious rally on this type of good news. Currently, short interest accounts for a healthy 37.6% of MBI's float.