TL;DR only occurs with HWE kernel - odd

Results of:
$ cat /sys/devices/system/cpu/vulnerabilities/mds

Host Bionic: 4.18.0-20-generic / 2.11+dfsg-1ubuntu7.13

Guest-lvl1: 3.13.0-170-generic / 2.0.0+dfsg-2ubuntu1.46
  Vulnerable: Clear CPU buffers attempted, SMT Host state unknown
Guest-lvl2: 3.13.0-170-generic
  Vulnerable: Clear CPU buffers attempted, no microcode; SMT Host state unknown

It is "ok" that without passthrough it hits "Clear CPU buffers
attempted"

Using passthrough:
Guest-lvl1: 3.13.0-170-generic / 2.0.0+dfsg-2ubuntu1.46 + passthrough
  Mitigation: Clear CPU buffers; SMT Host state unknown
Guest-lvl2: 3.13.0-170-generic + passthrough
  Mitigation: Clear CPU buffers; SMT Host state unknown

So this does not trigger witrh 3.13 kernels for me.

Upgrading to 4.4 in both trusty levels now.

Guest-lvl1: 4.4.0-148-generic / 2.0.0+dfsg-2ubuntu1.46 + passthrough
  Mitigation: Clear CPU buffers; SMT Host state unknown
Guest-lvl1: 4.4.0-148-generic
$ cat /sys/devices/system/cpu/vulnerabilities/mds
Not affected

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https://bugs.launchpad.net/bugs/1829555

Title:
  nested virtualization w/first level trusty guests has odd MDS behavior

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