10-year Puerto Rico general obligation bond yields spiked to 12.3% – the highest on record – as the island’s Government Development Bank’s $354 million of principal and interest due on December 1st looms. Puerto Rico is now 450bps ‘riskier’ than Greece, which means Treasury Secretary Jack Lew was wrong again in not taking the German FinMin’s offer in July to swap Puerto Rico for Greece…
It appears Schauble’s July trade would have been a loser…
As we joked at the time…
Retweet for Puerto Greeko Favorite for Puerto Grico … (please don’t)
— zerohedge (@zerohedge) July 9, 2015
And now PR is 450bps wider than Greece..
For context, PR’s 12.3% yield is ~10.3 percentage points more than benchmark municipal bonds with the same maturity and equivalent to a 21.8% taxable interest rate for the highest earners.
Puerto Rico’s bondholders face mounting risks as the commonwealth veers toward default. As Bloomberg notes, a spokesman for Governor Alejandro Garcia Padilla said Thursday that while the commonwealth intends to meet its obligations, the government could run out of cash and will pay for essential services over creditors. That announcement came a week after the Obama administration proposed giving the commonwealth unprecedented authority to restructure its entire debt burden through bankruptcy protection, a proposal the governor endorses.
Charts: Bloomberg
