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Puerto Rican Bonds

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President Trump sent Puerto Rican bonds ducking for cover when he suggested he might “wipe out” the U.S. territory’s $73 billion in debt. And while that would alleviate the devastated island’s battered balance sheet, this would spell trouble for its investors. 

No surprise that prices on PR’s 2035 general obligation (GO) bonds slid to a record low of 30.25 cents on the dollar from 44 cents the day before. 

Two questions we have about Trump’s remarks: 1) If he is serious, could he do this? and 2) What are the chances it’ll happen? 

1) Trump can’t wave his hand and make over $70 billion in debt disappear…he’ll need help from bankruptcy courts.

2) Mick Mulvaney, head of the Office of Management and Budget, said not to take Trump literally: “I won’t take it word for word with that.” 

Apparently no one told that to the bond gods.

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