San Juan, the economic hub of Puerto Rico, triggered a rush for its $121 million muni-bond sale this week, as investors seized a rare opportunity to get exposure to island.
Buyers placed about $2.2 billion of orders for the tax-exempt and taxable general obligation bonds sold by the Municipality of San Juan, according to people familiar with the offering who asked not to be named because the information is private. The deal received orders from more than 50 firms, including traditional mutual funds focused on state and local debt, one of the people said.
“There’s just not a lot of issuance of BBB bonds this year, like virtually none, so if you’re a buyer like ourselves and looking for yield for stable underlying credits, there hasn’t been much that you can invest in,” said Andrew Clinton, chief executive officer of Clinton Investment Management. “It just came to the market at the right time. People are starved in terms of demand for that type of paper, and it was an attractive yield.”
See more: Higher Rates Create New Opportunities in Muni Bonds
Bonds that were sold Tuesday have rallied since, signaling that demand strengthened even more.
Tax-exempt debt due in 2051 was sold with a 5% coupon and a yield 4.9%, or 58 basis points above benchmark municipal debt, according to data compiled by Bloomberg. Those securities, the most actively traded of the bond offering, have gained since Tuesday’s initial pricing. The 2051 bonds changed hands on Thursday at an average yield of 4.77%.
A spokesperson from RBC Capital Markets, the deal’s underwriter, declined to comment. San Juan didn’t immediately respond to a request for comment.
Rare Opportunity
Proceeds from the sale will finance capital projects including improvements to the city’s municipal hospital, the United School of San Juan, an animal protection and adoption center, parks and a facility serving homeless people and other at-risk populations.
Aside from housing bonds backed by US Department of Housing and Urban Development funds, investors have had few opportunities in recent years to buy investment-grade debt tied to Puerto Rico.
San Juan’s sale is among the few municipal borrowings from Puerto Rico since the commonwealth sought bankruptcy protection in 2017. Puerto Rico’s central government has yet to return to the municipal-bond market as it works to show fiscal discipline and maintain balanced budgets.
The island’s government-owned electric utility also remains in bankruptcy as it seeks to restructure nearly $9 billion of debt. It is unclear how much Puerto Rico’s government may need to contribute to resolve the case.
The bonds are repaid with property-tax collections and a portion of sales-tax revenue. San Juan levies a special tax on real and personal property known as the Contribución Adicional Especial, or CAE. The collections are pledged to repay the municipality’s general obligation bonds and notes, according to bond documents.
CAE collections totaled $101.6 million in fiscal 2025, compared with $53.5 million of debt service secured by the revenue, the documents show.
Moody’s Ratings assigned the debt a Baa3 rating, while Fitch Ratings rated the bonds BBB+.
A message from Advisor Perspectives and VettaFi: Discover something new! Click here to register for our upcoming webcasts.
Bloomberg News provided this article. For more articles like this please visit
bloomberg.com.
More Tax Loss Harvesting Topics >
