As the Puerto Rico saga continues it has created a drag on the high yield municipal bond market.
The weight of Puerto Rico debt in the market place as measured the market value of bonds in select indices as of September 29, 2015:
- S&P Municipal Bond Index (S&P’s broadest municipal benchmark): 1.96%
- S&P Municipal Bond High Yield Index: 22.46%
- S&P National AMT-Free Municipal Bond Index (investment grade only): 0%
The impact of Puerto Rico on year-to-date returns through that period is:
- S&P Municipal Bond High Yield Index (Excluding Puerto Rico bonds): 4.42%
- S&P Municipal Bond High Yield Index (Including Puerto Rico bonds): 0.89%
The expectations of defaults, creditor negotiations, and the uncertainty of legislation changes all make the situation fluid for the bond holders.