Puerto Rico's government is monitoring the market for its long-term debt, whose interest rates have soared above 10 percent, threatening planned bond issues.
U.S. Municipal Securities Rulemaking Board, or MSRB, figures showed that Autoridad de Edificios Publicos, or AEP, bonds, considered a proxy for Puerto Rican government securities, were drawing bids at 10.02 percent interest rates last week.
The soaring interest rates reflect growing concern among investors about the solvency of Puerto Rico, whose public finances are being compared to those of Detroit, which filed for bankrutpcy in July, bond market analysts said.
The Puerto Rican government is trying to convince investors that the comparison is faulty, with Banco Gubernamental de Puerto Rico president Jose Pagan publicly defending the actions of the administration of Gov. Alejandro Garcia Padilla, who took office in January.
Puerto Rico's credit is solid and the island should benefit from the tax reforms and economic plan implemented by the governor, Pagan said in a statement.
Others, however, pointed out that the bond market has turned against the island, with investors demanding higher interest rates on the debt in exchange for buying what are considered riskier securities.
Puerto Rico's securities are being treated by investors as if they were "junk bonds," University of Puerto Rico economics professor Jose Alameda told Efe.
The high interest rates have forced the government to postpone a $4 billion bond issue slated to finance part of the island's deficit.
Puerto Rico's securities are issued and traded on the U.S. municipal bond market, which has been affected by rising rates in the past few months.
Credit-rating agencies Fitch and Standard & Poor's rate Puerto Rican sovereign debt "BBB-," while Moody's has a "Baa3" rating on the securities, all one notch above "junk" and with a "negative" outlook.
Puerto Rico's economic is in a deep slump, with the unemployment rate hitting 13.2 percent in June, the latest month for which figures are available. EFE