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What Puerto Rico’s Downgrade Means for Investors
February 10, 2014 at 19:00 PM EST
Puerto Rico has been making headlines for months. Yesterday, the clincher finally appeared: S&P downgraded the island’s debt to “junk” status. What does it mean for the municipal bond market? After all, given the triple-tax-exempt status of Puerto Rico bonds, they are widely held by muni investors across the nation. The answer may surprise you: We don’t expect it will be very meaningful to the broader market at all. The downgrade was not at all unexpected. As I alluded to in my November blog post, there has been a large disconnect between the rating agencies’ assessment of Puerto Rico’s debt and the market’s view. In fact, Puerto Rico bonds have been trading as non-investment grade since last summer, so the new BB+ rating is actually a better reflection of the island’s credit profile and pricing. Whereas the broader municipal market was down 2.55% last year, Puerto Rico was down 20.47%. Clearly, investors had [...] Click here to read the original article on ETFdb.com. Related Posts: No Related Posts
Puerto Rico has been making headlines for months. Yesterday, the clincher finally appeared: S&P downgraded the island’s debt to “junk” status. What does it mean for the municipal bond market? After all, given the triple-tax-exempt status of Puerto Rico bonds, they are widely held by muni investors across the nation. The answer may surprise you: We don’t expect it will be very meaningful to the broader market at all. The downgrade was not at all unexpected. As I alluded to in my November blog post, there has been a large disconnect between the rating agencies’ assessment of Puerto Rico’s debt and the market’s view. In fact, Puerto Rico bonds have been trading as non-investment grade since last summer, so the new BB+ rating is actually a better reflection of the island’s credit profile and pricing. Whereas the broader municipal market was down 2.55% last year, Puerto Rico was down 20.47%. Clearly, investors had [...]
