PRCDEV 7.5 08/20/2040 (Update)

GDB Debt Recovery Authority of Puerto Rico Bond

Credit, Macro


Please note, this is an update to Long - GDB Debt Recovery Authority of Puerto Rico Bond (PRCDEV 7.5 08/20/2040), which was originally presented on 12/01/2019.

Publicly traded companies mentioned herein: N/A

Highlights

The presenter trades Puerto Rico’s COFINA bonds as opportunities present themselves. These triple tax-free bonds are tied to sales and use tax revenue in Puerto Rico. About a year ago, existing bonds were restructured and exchanged into ~$12B of new bonds that are duration-weighted 17 years with an average coupon of 5%. Following a sell-off from ~110 to ~75, the presenter was able to buy COFINA bonds at a MDD% tax effective yield, which he considered attractive given his belief that the bonds were well-covered. Market prices have rebounded to the mid-90 range; while the presenter doesn’t find COFINA bonds attractive at current levels, he would be interested in buying again if another sell-off occurs.

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