Puerto Rico Funds Investment is Risky
From the Desk of Jim Eccleston at Eccleston Law Offices:
The tax advantage of Puerto Rico bonds makes them attractive. However, Puerto Rico has struggled with financial problems for a while. Although Puerto Rico’s bonds bounced back strongly after the financial crisis, the subsequent deterioration of the commonwealth’s fiscal situation made the Puerto Rico Index slip from bad to worse. Ultimately, the damage among funds with heavy Puerto Rico weightings has been painful, and a number of large funds have been caught up in the carnage.
Recently, there have been press reports that Puerto Rico has had difficulty selling new bonds, and that it has been falling back on private placement and bank financing. Normally, that kind of liquidity trouble might be cause for panic.
However, people still hold different opinions as to the future of Puerto Rico bonds. Some think that the commonwealth’s more structurally defensive issues still deserve relatively high investment-grade ratings. On the other hand, others are not so sure.
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