S&P Dow Jones Indices issued a statement announcing that all municipal bonds issued by Puerto Rico had been removed from the S&P National AMT-Free Municipal Bond Index as of Jan. 31.
S&P DJI noted in the statement that the index was designed for investability, and typically excludes the higher-risk and less liquid portions of the municipal bond market. It said Puerto Rico’s municipal bonds had been trading at prices more typical of high-yield corporate debt and exhibiting uneven liquidity.
However, the statement also said that Puerto Rico bonds would continue to be included in S&P DJI’s municipal bond indexes that are intended for measurement and analysis purposes, such as the S&P Municipal Bond Index and the S&P Taxable Municipal Bond Index.
According to the release, Puerto Rico’s bonds currently have the lowest possible ratings a municipality can have and still be considered investment grade by ratings services S&P, Moody’s and Fitch, with all three firms indicating the bonds could be demoted to below investment grade in the future.