Cumberland Advisors put out a quick note on Hurricane Maria and insured Puerto Rico bonds, while adding that though uninsured Puerto Rico bonds have traded somewhat lower in price, insured Puerto Rico debt has actually traded up in price and down in yield since last week’s Hurricane Irma ripped into the Virgin Islands, also a U.S. commonwealth.
“We don’t know what the aftermath of the hurricanes will be, but there will clearly be Federal help to rebuild the infrastructure of both the Virgin Islands and Puerto Rico,” said John Mousseau, executive vice president & director of fixed income at Cumberland. “To the extent that Federal aid promotes the rebuilding of infrastructure in Puerto Rico, there may be a positive effect on the finances of the major issuers down the road. The bond insurers, who are already paying interest on defaulted Puerto Rico debt, may see some improvement in the fortunes of the issuers and can perhaps resume paying debt sooner, rather than later. That is our best reasoning on the improvement we have seen in insured Puerto Rico bonds over the last week.”
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