The benchmark Puerto Rico general obligation 8s in 2035 yield jumped to its highest level since July after the Commonwealth's Government Development Bank sold $319.05 million of notes Thursday evening, according to data provided by Bloomberg.
The 8s in 2035 traded at 9.37% on Friday morning. This is the highest their yields have been since the bonds traded at 9.58% on July 14, and is 19 basis points higher than the 9.18% the bonds traded at on Thursday.
The notes contain a June 2015 maturity and a 7.75% yield. The $319.05 million sold account for part of an issuance expected to total $621 million, sources told The Bond Buyer. An additional $79.76 million of notes with the same maturity and coupon were sold, according to data provided by Bloomberg. The GDB is expected to sell more notes Friday. Market participants said that because this sale is expected to total more than the originally scheduled $700 million, the Commonwealth has exposed great liquidity needs.
"Yesterday's GDB financing shows how tenuous the Commonwealth's liquidity has become, with revenue collections continuing to fall short of budgeted expectations," Triet Nguyen, managing director at NewOak, said in an emailed statement. "The notes' lockbox feature on pledged revenues and shorter maturity in June 2015 effectively make them senior to the regular GO debt, should cash flow shortfalls develop over the next 9 months."
Scales:
Municipal bonds strengthened on Friday with yields for bonds maturing in four years falling by as much as one basis point, according to data provided by Municipal Market Data. They fell by as much as two basis point for bonds maturating in five to 10 years, by up to one basis point for bonds maturing in 11 to 14 years, and by as much as two basis points for bonds maturing in 15 to 20 years.
Bonds maturing in 21 to 30 years strengthened by as much as one basis point.
Treasuries mostly strengthened on Friday with the 10-year falling by three basis points to 2.31%, and the 30-year also dropped by three basis points to 3.04%. The two-year note held steady at 0.46%.
