US: Trump brings Puerto Rico in focus – ANZ

The US municipal debt market is typically a fairly unexciting place, suggests the analysis team at ANZ. However, that changed this week when Trump commented regarding Puerto Rico’s immense public debt load in light of the catastrophic hurricane damage: “We have to look at their whole debt structure,” Trump said.

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 “They owe a lot of money to your friends on Wall Street. We’re going to have to wipe that out. That’s going to have to be – you know, you can say goodbye to that.” Puerto Rico’s benchmark bonds plummeted from 44 cents in the dollar to a little over 30 cents before rebounding somewhat. Administration officials quickly moved to provide some “clarification” on what many analysts consider an unworkable suggestion: “I think what you heard the president say is that Puerto Rico is going to have to figure out a way to solve its debt problem,” revised Mick Mulvaney, director of the White House budget office. Now eyes are swivelling to other heavily indebted municipal borrowers, including Illinois and Connecticut and the US Virgin Islands.”