Rieger Report: Puerto Rico munis see a bounce (last gasp?)

The rocky road that is the Puerto Rico municipal bond market continues.  Last week’s bi-partisan Puerto Rico Restructuring Bill also referred to as the ‘rescue bill’ has created a reason for the bond market to react positively.  There are ramifications to the ‘rescue bill’ however including potentially eroding bondholder (creditor) provisions for repayment.  Meanwhile, bondholders of the Puerto Rico Government Bank debt have rekindled their lawsuit seeking to retain their protections as creditors.  The net result: the S&P Municipal Bond Puerto Rico General Obligation Index is reflecting a 2.29% positive total return so far in May but not without volatility:

  • The weighted average price of bonds in the Index hit a record low of 68.38 on May 10th. (Prices of  bonds represent a percentage of par value)
  • The weighted average yield of bonds  in the Index hit a 2016 high on May 10th of 10.89% and have dropped 36 basis points since then to end at 10.53%.
  • The impact on the broader municipal bond market can be seen in the high yield segments: the S&P Municipal Bond High Yield Index has returned over 4% year-to-date and the S&P Municipal Bond High Yield Index ex-Puerto Rico has returned over 5%.
Source: S&P Dow Jones Indices, LLC. Data as of May 20th 2016. Chart is provided for illustrative purposes. It is not possible to invest directly in an index. Past performance is no guarantee of future results.

Source: S&P Dow Jones Indices, LLC. Data as of May 20th 2016. Chart is provided for illustrative purposes. It is not possible to invest directly in an index. Past performance is no guarantee of future results.

The posts on this blog are opinions, not advice. Please read our disclaimers.

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