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  • msf February 2014
  • scott February 2014
  • Ted February 2014
Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

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anyone buying PR bond?

Comments

  • scott
    edited February 2014
    There have been all of these articles talking about how they are a buy. Ooops.

    CNBC just now: PR downgraded to junk.

    CNBC: Roughly 70% of US bond mutual funds own PR debt.
  • TedTed
    Reply to @scott: S&P cuts rating to junk
    Regards,
    Ted
    http://blogs.barrons.com/incomeinvesting/2014/02/04/sp-cuts-puerto-rico-rating-to-junk-citing-limited-liquidity/tab/print/
  • msf
    Reply to @Ted: Is this the same S&P that downgraded the US - slamming the political process, and not joined by other NRSROs in its opinion?

    That's AFAIK, (certainly true of Fitch and Moodys), I haven't checked all the minor NRSROs (e.g. M*). On the other hand, one does find other credit agencies that joined S&P in downgrading the US for politically tainted reasons, e.g. Dagong (China).

    I mention this not to minimize Puerto Rico's situation, but to raise questions about both the source of the downgrade and the impact. After S&P's downgrade of Treasuries, the price of Treasuries rose. I'm not saying the same is true of PR - I just did a quick spot check (very few, may not be representative) - prices may be all over the map. One bond (now BB+) down 10%, another (now BB+) flat, yet another (A+) up a bit. Could be very different tomorrow.

    Even a 10% drop isn't as big as it sounds, since PR bonds typically mature in decades. Amortizing that drop over many years amounts to a significant but not huge, increase in yield (and that increase in yield, due to market discount, is taxable). Meanwhile, other bonds aren't moving. Lastly, there are lots of PR bonds that aren't affected by this downgrade - this affect only GO bonds.

    I did see what struck me as a lot of activity. Many of these bonds trade only every few days, yet each bond I checked had activity today. Again, could be small sample size, or could be thrill seekers:-)

    Best place for data: emma.msrb.org. If you use the "Market Activity" tab, you can do a search on PR bond trades. Today there were 1,933 For some perspective, there were 1489 in NJ, 805 in Michigan, 4,320 in NY. (Honestly, I don't know if the PR figure is high, I don't usually look at the trade activity figures.)
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