REFILE-Puerto Rico yields rise after S&P cuts rating to junk

Tue Feb 4, 2014 4:51pm EST

NEW YORK Feb 4 (Reuters) - Some Puerto Rico municipal bond yields rose above 10 percent on Tuesday after Standard & Poor's Ratings Services cut the commonwealth's credit rating to junk.

A Puerto Rico general obligation refunding bond maturing in 2036 hit a yield of 10.16 percent shortly after S&P downgraded the cash-strapped territory's credit rating, from 9.66 percent earlier in the day.

The iShares U.S. Municipal Bond exchange-traded fund dropped about half a percent after the downgrade.

One market participant said the cut to BB+, one level below investment grade, was a surprise because it came so soon after S&P had put the Caribbean island on notice for a downgrade.

"It's a little late in the day to see what the true impact is going to be," said Gary Pollack, head of fixed income trading at Deutsche Bank in New York.

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