Puerto Rico's general-obligation bonds rallied, with some yields falling to the lowest since July, after officials said the commonwealth would pay all that it owed on the constitutionally protected debt while missing payments on other securities.
The island's benchmark general obligations issued in March 2014 with an 8% coupon traded Monday at an average 73.6 cents on the dollar, to yield 11.4%. It's the highest price since Dec. 11. The yield on securities due in July 2041, the second-most-traded Puerto Rico obligations of the day, touched 9.3%, the lowest since July.
Puerto Rico Governor Alejandro Garcia Padilla said last week that the island would default on $37 million of the almost $1 billion in bond payments due Jan. 1 and divert revenue to make others. It will fail to pay on $35.9 million of non- commonwealth guaranteed Puerto Rico Infrastructure Financing Authority debt and $1.4 million of Public Finance Corp. bonds.
By contrast, the commonwealth's constitution guarantees payment on general obligations before anything else.
