Puerto Rico Issues 40% More Debt than CA in First 4 Months of 2012….and More.

Reuters: Puerto Rico Bets on American Tourists to Pay Debt – The island sold $4.82 billion of bonds in 2012’s first four months, or 40 percent more than California.  But with debt equivalent to 103 percent of its annual gross product, the U.S. territory carries a burden that would make troubled states like California and Illinois blanch. The two states’ debt levels are just under 5 percent of economic output.

More on Puerto Rico:



WSJ: Hedge Funds are Piling into Long Bond Futures – Large speculators aggressively bought 30-year T-bonds futures by ~500% to $7.2bn notional from $1.2bn notional last week. Readings moved into a crowded long for the first time since Dec. ’07. Yields are testing support near 2.80-2.70% and resistance is at 3.05-3.00%.

Chris Ciovacco: Treasuries Setup for a Possible Reversal– There are three reasons to be open to a possible reversal in Treasuries: 1. Valuations / near-record low yields 2. Slowing momentum 3. Better than expected outcomes in Europe

Bond Buyer: Muni’s Quite to Slightly Firmer with Dearth of Activity – According to the Municipal Market Data scale, munis were firmer Tuesday. On Friday, the 10-year yield and the 30-year yield finished steady for the fourth consecutive trading session at 1.83% and 3.14%. The two-year yield also closed flat at 0.33% for the fourth consecutive trading session.

BusinessWeek: Kodak Court Loss Leaves Less for Bondholders – More than $1 billion of potential patent value may have “evaporated” because of a U.S. International Trade Commission judge’s preliminary finding in favor ofApple Inc. (AAPL) (AAPL) and Research in Motion Ltd. Kodak’s $250 million of 7.25 percent senior unsecured notes due in 2013 lost 48 percent of their value after the May 21 decision. Its secured bonds fell about 15 percent. More than $1 billion of potential patent value may have

Bloomberg: Do Investors Care about Ratings Agencies? – The response to the Moody’s Investors Service downgrade of the biggest Nordic banks was rising bond and share prices.  The reaction is the latest sign that investors are paying less attention to the views of rating companies and relying more on their own analysis to determine whether to buy or sell.

Bloomberg: BBB Borrowing Cost For Local Debt Nearing 2008 Low: Muni Credit – The yield penalty over top-grade bonds on local debt rated BBB fell to 1.28 percentage points this month, the smallest since 2009, data compiled by Bloomberg show.

BusinessWeek: Treasuries Losing Appeal With Widest Yield Penalty: Muni Credit – Interest rates on AAA 30-year municipals climbed to about 113 percent of Treasuries last week, the most since Feb. 1. The average is 103 percent going back to 2001.

Reuters: SEC redefines ‘sophisticated’ in municipal market –  Specifically, the new definition identifies a sophisticated investor as an institutional buyer who can independently gauge investment risks and market values of securities and can evaluate the recommendations of broker-dealers.  Also on Friday, the SEC lowered the amount of assets “natural persons” must have to qualify as institutional customers to $50 million from $100 million.

FT: Short Interest In Surge for Junk Bond ETFs – Short positions in the two largest exchange-traded funds that track corporate junk bonds have reached record highs in a sign that investors are becoming more bearish on the creditworthiness of risky US companies.

Bond Buyer: The Chase for Spring Paper is On – Spring is in the air — and for muni investors that means the hunt is on to replace paper that will mature in June and July when more than $70 billion in coupon payments and proceeds from called and maturing bonds hits their accounts.  An estimated $49 billion of redemptions are slated for June 1, with another $35.48 billion on July 1, according to Interactive Data as of May 8.

BusinessWeek: Global Bond Sales Behind 2011’s Pace in Crisis – Sales of $1.63 trillion this year compare with the $1.73 trillion for the same period of 2011, even after Hartford, Connecticut-based United Technologies Corp. (UTX) (UTX) last week issued the most bonds in the U.S. since 2009.  “Investors are demanding new-issue concessions which is putting treasurers off, because there’s uncertainty about what’s going on in the global economy.”


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David Waring

David Waring was the founder of LearnBonds.com and has been a major contributor to the extensive library of investing news and information available on the site. Until the launch of Learnbonds.com in late 2011 there was no single site on the internet catering exclusively to the individual bond investor. This was true even though more individuals own stocks than bonds. Learn Bonds was launched to fill that gap.


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