Popular Front of Judea
27th October 2013, 04:09
Being on the West Coast I haven't been aware of Puerto Rico's perilous financial state. So it's news to me. Looks like 2014 is slated to be another interesting year. Welcome to the Long Recession.
The island's economy, meanwhile, has been closed to the capital markets as investors have demanded high interest payments before lending to Puerto Rico again.
The "so what?" here for Americans investors is that more than 75 percent of U.S. municipal bond funds own debt from Puerto Rico, according to Morningstar. The pervasiveness of the island's debt stems from its "triple exemption" status.
Interest payments received from Puerto Rico are not subject to federal, state or local taxes. That's why investors have been willing to lend the island roughly $70 billion, even though its economy is only about $100 billion.
Puerto Rico also is actively traded among high-yield investors, many of which are hedge funds, because there are so few places to find high yields. Some of Puerto Rico's debt is yielding nearly 9 percent tax-free.
The government recently has been trying to repair its budget by raising taxes and cutting pension costs. The U.S. commonwealth has been in a recession since 2006.
Puerto Rican government seeks to calm investors about debt | CNBC (http://www.cnbc.com/id/101113739)
The island's economy, meanwhile, has been closed to the capital markets as investors have demanded high interest payments before lending to Puerto Rico again.
The "so what?" here for Americans investors is that more than 75 percent of U.S. municipal bond funds own debt from Puerto Rico, according to Morningstar. The pervasiveness of the island's debt stems from its "triple exemption" status.
Interest payments received from Puerto Rico are not subject to federal, state or local taxes. That's why investors have been willing to lend the island roughly $70 billion, even though its economy is only about $100 billion.
Puerto Rico also is actively traded among high-yield investors, many of which are hedge funds, because there are so few places to find high yields. Some of Puerto Rico's debt is yielding nearly 9 percent tax-free.
The government recently has been trying to repair its budget by raising taxes and cutting pension costs. The U.S. commonwealth has been in a recession since 2006.
Puerto Rican government seeks to calm investors about debt | CNBC (http://www.cnbc.com/id/101113739)