As expected, PR GOs are staging a significant relief rally in the wake of the 2/18 investor webcast. According to Municipal Market Data, PR GO spreads vs AAA in 5 and 10 years have tightened by 115 BP in the last week alone (through 2/21).The 30 year range has also rallied, but more modestly, with spreads tightening by only 25 BP.  As a result, although the PR yield curve remains sharply inverted, both the 5 yr and 10 yr paper have outperformed 30 yr paper by about 90 BP.

The reduced curve inversion may be an indication that investor concerns about PR’s “market access” are receding, at least for the time being. Crossover buyers who are more accustomed to shorter corporate bond maturities may also have been more active in the intermediate portion of the curve.

YTD through 2/21, the S&P Municipal Bond Puerto Rico Index is up 5.51%, compared to +2.58% for the S&P National AMT-Free Municipal Bond Index, with the bulk of the performance occurring in February. Even after this recent rally, the PR Index is still down 18.2% over the last 12 months, compared to a loss of only 1.5% for the Ntl AMT-Free Index.

 

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About Triet M. Nguyen

Triet Nguyen is a veteran of the fixed-income markets and a high yield/distressed municipal bond expert. Over his 32 year career, Triet has designed, marketed and managed every type of buy side investment products, from mutual funds (open and closed-end) to managed accounts and hedge funds. He is currently the managing partner of Axios Advisors LLC, an independent municipal research and investment advisory boutique specializing in high income strategies. Triet is the author of “Investing In The High Yield Municipal Market”, to be published in July 2012 by John Wiley/Bloomberg Press. He also moderates the Municipal Credit Research Forum on LinkedIn. His Twitter handle is @HighYieldPro. Before rejoining Axios (which he founded in 2002), Mr. Nguyen was a Senior Vice President at B.C. Ziegler, where he traded tax-exempt high yield and taxable municipal bonds (including Build America Bonds). From January 2004 to January 2008, he was a Managing Director of Saybrook Capital, LLC, managing one of the first ever municipal hedge funds dedicated to a credit strategy. As Director of Information Services at ebondUSA.com between 2000 and 2001, Triet contributed to the development of a pioneering online muni bond evaluation system. Prior to 2000, he was a Vice President/Portfolio Manager of the John Hancock Funds and a Senior Portfolio Manager of the Putnam Funds. Triet received a B.A. in Economics and an M.B.A. in Finance and Accounting from the University of Chicago.

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