Municipals get boost from Treasuries following FOMC minutes; Fitch downgrades Puerto Rico debt

By Sheri Kasprzak

New York, July 9 – Municipals were somewhat better on Wednesday after Treasuries got a boost from the release of the June Federal Open Market Committee meeting minutes, insiders said.

Yields on shorter maturities were seen lower by about 2 basis points with longer maturities seeing yields fall by about 1 bp.

Over in Treasuries, yields fell slightly as well after the June FOMC meeting minutes indicated its asset-purchase program will end in October.

The five-year Treasury note yield saw the most movement, falling by 2.5 bps to end at 1.673%, and the 10-year note yield fell by 1.5 bps to 2.549%. The 30-year bond yield fell by 1.5 bps to 3.367%.

The Fed has been reducing the program over the course of the year.

More Puerto Rico downgrades

Elsewhere during the session, Fitch Ratings downgraded various Puerto Rico bonds.

The agency downgraded the commonwealth’s general obligation debt to BB- from BB and the Puerto Rico Employees Retirement System pension funding bonds to BB- from BB.

Puerto Rico Sales Tax Financing Corp.’s senior lien sales tax revenue bonds were downgraded to BB- from AA-, and its first subordinated lien sales tax revenue bonds were lowered to BB- from A+.

The agency dropped the Puerto Rico Aqueduct and Sewer Authority’s series 2012A-B senior lien revenue bonds to B+ from BB+ and its guaranty revenue bonds to BB- from BB.

Additionally, the Puerto Rico Public Building Authority government facilities revenue bonds guaranteed by the commonwealth were cut to BB- from BB.

“The rating actions follow passage of the Puerto Rico Public Corporation Debt Enforcement and Recovery Act, which establishing a restructuring regime for public corporations that may become insolvent,” wrote managing director Laura Porter, managing director Doug Scott, senior director Karen Krop and managing director Richard Raphael.

“The act contemplates two procedures for addressing debt obligations. While they are intended to restore solvency over the long term, both procedures entail debt restructuring that would trigger suspension of debt payments and preclude the timely payment of principal and interest during the pendency of the proceedings.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.