Mary Miller, the U.S. Treasury Department’s undersecretary for domestic finance, said there is no “deep federal assistance right around the corner” for Puerto Rico and the U.S. government will give “any assistance we can on fiscal management.”
“We can be helpful in making sure that every federal dollar that Puerto Rico is entitled to is being spent effectively and efficiently,” Miller said at the Bloomberg Link State & Municipal Finance Conference in New York today.
“There are many conversations that are taking place between the island and Washington more broadly,” Miller said. “But I don’t want to convey that that translates into a direct ask for federal direct assistance, because that is not contemplated at this time.”
The average yield on a Puerto Rico general-obligation bond maturing in 2041 fell to about 7.7 percent yesterday from as much as 10.2 percent in September, according to data compiled by Bloomberg.
Puerto Rico’s credit rating is one step above junk. The fiscal health of the self-governing commonwealth of 3.7 million people affects the $3.7 trillion municipal bond market because more than three-quarters of U.S. muni mutual funds hold the island’s obligations, according to Morningstar Inc. The securities are tax-exempt nationwide.
A debt default by Puerto Rico would be “very hard to happen” given how the commonwealth directs revenue to bond payments and the diversity of the territory’s credits, said Melba Acosta, the island’s treasury secretary, who also spoke at the conference.
Miller, who is acting deputy Treasury secretary, also said there’s a “real opportunity” for regulators to complete this year the Volcker rule ban on banks trading for their own accounts.
“There’s still work to do before this is completed, but I am very heartened by the progress that I’m seeing and that we’ll get something this year,” she said.