April 14 The price of Puerto Rico's newest bonds
fell again on Monday, underperforming the wider municipal bond
market to notch their lowest session-ending price since their
debut a month ago.
The bonds, maturing in July 2035 and sporting a coupon of 8
percent, last traded at 87.75 cents on the
dollar, pushing the yield up to 9.33 percent. Bond prices and
yields move in opposite directions.
Puerto Rico, mired in a lengthy recession and carrying a
debt load in excess of $70 billion, sold $3.5 billion of bonds
in March, raising much-needed cash to thwart a looming cash
The bonds, which are rated as junk debt by the three major
credit ratings agencies, enjoyed huge demand at the March 11
auction as hedge funds and other investors with strong appetites
for risk flocked to their relatively high, tax-free yields. The
commonwealth's bonds are triple tax-free - exempt from federal,
state and local income taxes - meaning their coupon interest
rate of 8 percent is the equivalent of 13.25 percent on a
comparable fully taxable bond.
In the past two weeks, however, they have weakened
On Friday, they traded as low as 86 cents on an intraday
basis following news that Puerto Rico had hired additional teams
of restructuring experts.
Since their debut at 93 cents on the dollar, the bonds'
price has now fallen 5.25 cents, or 5.6 percent. Their yield has
climbed 98 basis points from a Day 1 close of 8.35 percent.
The bonds underperformed a wider U.S. municipal bond market
that was little changed on the day.
(Reporting by Hilary Russ; Editing by Dan Burns and Jonathan