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“Yet more important than Puerto Rico itself is the precedent that it’s set. Fabian and Washburn argue that PROMESA and the political wrangling that it took to craft has ‘sharply increased’ the risk of Congressional intervention in the municipal market going forward. They call it a ‘disaster for the municipal market’s legal status quo,’ and write that ‘it is increasingly difficult to assume that changes to municipal market structure are unlikely in the long term.’”
“With such strong and consistent flows into municipal bond mutual funds lately, the experts said investors are intent on avoiding the uncertainty and volatility of other fixed-income, taxable, and riskier assets by favoring municipal products – even with muni yields near record lows.”
“The Puerto Rico Aqueduct & Sewer Authority wants to issue the debt through a new agency to finance construction work delayed by the government’s fiscal crisis. As an inducement to skeptics, the agency would give investors first claim on revenue it collects from water and sewer bills, according to Efrain Acosta, the director of finance for the utility. It may also exchange an additional $1.1 billion of securities for its outstanding bonds to investors willing to accept less than they’re owed.”
“Ten-year U.S. yields will fall more than 50 basis points, or 0.5 percentage point, to 1 percent in the first quarter of 2017, according to Hornbach, the firm’s head of global interest-rate strategy in New York. None of the 61 economists surveyed by Bloomberg are predicting such a rally. The lowest forecast in the group is for 1.2 percent.”