Puerto Rico electric bonds gained in value a day after the biggest U.S. public-power utility received orders for more than twice the $673 million in debt it sold.
Puerto Rico Electric Power Authority bonds, rated one step above junk by Moody’s Investors Service and maturing July 2043, traded today with yields as low as 7.02 percent, data compiled by Bloomberg show. That’s 2.49 percentage points above top-rated munis of similar maturity and down from 7.12 percent yesterday. Yields move in the opposite direction of prices.
The electric agency boosted the sale by $73 million, to $673 million, after receiving $1.5 billion of orders from investors, Jose Pagan, interim president at Puerto Rico’s Government Development Bank, said in a statement. The bank handles the island’s capital-markets transactions. It was the biggest sale from a commonwealth borrower in more than a year, Bloomberg data show.
More than 60 institutional investors participated in the deal, according to Pagan. Muni-bond funds purchased about 50 percent of the deal, with investors who typically buy taxable debt accounting for 10 percent of the sale, said Lauren Bellmare, a spokeswoman for Morgan Stanley, the lead underwriter, in an e-mail. Individual buyers purchased about five percent, Bellmare said.
The agency borrowed as investors, spooked by rising interest rates and Detroit’s record bankruptcy, pulled $4.86 billion from muni mutual funds in the four weeks through July 24, the most since February 2011, Lipper US Fund Flows data show.
“It’s a big positive that in this kind of market, this type of deal can get done,” said Daniel Solender, who helps manage $19.5 billion of munis at Lord Abbett & Co. in Jersey City, New Jersey and declined to say whether his firm participated in the deal. The sale required “more traditional, fund-type buyers to get it done.”
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