Puerto Rico Record Yields Luring Buyers of Distress: Muni Credit

Puerto Rico’s record-high yields are attracting investors who typically buy the riskiest municipal debt, in a sign of how dire the island’s finances have become as it prepares to borrow as much as $1.2 billion by year-end.

As the commonwealth’s leaders struggle to revive a shrinking economy and keep the territory’s debt above junk, yields have risen enough that hedge funds, which aren’t traditional municipal investors, have been buying, according to Matt Fabian at Municipal Market Advisors. Jon Schotz, who focuses on defaulted munis at Kayne Anderson Capital Advisors LP, which oversees about $23 billion, said he’s analyzing the island’s obligations for a possible purchase.