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(Adds PREPA performance, governor's comment, updates market activity)
NEW YORK, July 2 (Reuters) - Puerto Rico benchmark general obligation bond prices touched a record low on Wednesday as a recent slew of ratings downgrades and concerns the Commonwealth's public corporations will default continued to weigh on trading.
The new low comes on a fifth day of selling in the island's debt and will be a concern for local officials who have argued that general obligation bonds cannot be lumped together with peripheral issuers such as the electric power authority, PREPA.
The reaction to a new law in Puerto Rico that would allow public corporations like PREPA to restructure appears to have caught officials off guard. Governor Alejandro Garcia Padilla threatened to sue Moody's after the agency downgraded the debt three notches on Tuesday.
"Moody's acted irrationally and irresponsibly," Padilla said at a press conference on Wednesday. "It was an act of reprisal and revenge against the people of Puerto Rico."
Moody's declined to comment.
The single maturity general obligation debt, which carries a coupon of 8 percent and matures in 2035, traded at 83.50 cents, giving a yield of 9.878 percent, according to Thomson Reuters data. The average price over the day was 84.725 cents.
The selloff in Puerto Rico debt has helped push the Barclays Capital high yield index to its lowest level in two months. The index has lost 2 percent since the law enabling Puerto Rico's public corporations to restructure their debt was announced on June 25.
The fall through Tuesday represents the steepest four-day decline for the index since August 20, 2013. During the four days through Tuesday the Barclays benchmark municipal market index rose 0.2 percent.
Selling in Puerto Rico's public corporation debt also continued for a fifth day on Wednesday. Debt of electric power authority PREPA maturing in 2036 and carrying a 6.75 percent coupon traded with an average price of 39.882 cents, compared to 44.50 on Tuesday.
Debt of PREPA, seen as the most likely candidate to restructure, fell 17 percent in June, with 14.2 percent of that coming in the last week of the month when the restructuring legislation was announced, according Stephen Winterstein, chief municipal strategist at Wilmington Trust Investment Advisors.
That performance "tells me that the market is expecting some kind of restructuring with PREPA," Winterstein said.
Winterstein calculated PREPA's performance by stripping out the utility sector from the Standard & Poor's Puerto Rico bond index. (Reporting by Edward Krudy Additional reporting by Hilary Russ; Editing by James Dalgleish and Chizu Nomiyama)