Municipal Bond Forum
President Trump and Puerto Rico’s debt
Q
What’s the upshot of President Trump’s “pledge” to wipe out Puerto Rico’s debt and how will this affect my Puerto Rico bonds? How far will the insurance on my Puerto Rico bonds carry me?
A
James A. Klotz responds:
President Trump does not have the ability, legal or otherwise, to dictate the outcome of Puerto Rico’s debt restructuring.
The restructuring of Puerto Rico’s debt is outlined in PROMESA (see Next Move On Puerto Rico Muni Debt: Oversight Board), which was enacted by the U.S. government in June 2016.
What President Trump did do, however, was panic bondholders, causing excessive selling and lower prices.
It is worth noting that insured bonds were virtually unaffected.
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