The U.S. Treasury Department isn’t planning to provide assistance to Puerto Rico and continues to monitor the situation after the commonwealth’s bond yields rose to records, according to a Treasury spokeswoman who spoke on condition of anonymity.
Governor Alejandro Garcia Padilla, 42, is struggling to revive a shrinking economy and keep Puerto Rico’s debt above junk. The U.S. territory and its agencies, whose bonds are tax-exempt nationwide, plan to borrow as much as $1.2 billion by Dec. 31 to balance budgets. Officials plan to use debt backed by sales-tax revenue, as the securities are rated three to four levels above the island’s general obligations.
Even the sales-tax securities, which Moody’s Investors Service cut on Oct. 3, trade with historically high yields.
“Forced selling in local island bond markets has added stress to overall trading,” Alan Schankel, managing director at Janney Montgomery Scott LLC in Philadelphia, said in a research note Oct. 4. “Volatility and price pressures remain ongoing for Puerto Rico bonds.”
Puerto Rican bonds have fallen 18 percent in 2013, including price change and interest payments, on pace for their worst year since at least 2000, according to Standard & Poor’s data. Commonwealth general-obligation bonds maturing in July 2041 traded today with a yield as high as 9.2 percent after reaching 10.06 percent on Oct. 4, the most since Sept. 9, according to data compiled by Bloomberg.
Senate President Eduardo Bhatia told municipal-bond analysts in New York yesterday that the White House and Treasury are “wondering how they can help Puerto Rico send a very strong signal of stability right now,” according to the New York Times.
“I did not say that U.S. Treasury was going to bail out Puerto Rico,” Bhatia said in a text message today. “I did say that there is a White House Puerto Rico task force and that conversations about economic development ideas for Puerto Rico have taken place between the local government and the federal government.”