Puerto Rico Muni Issue Could Hit $3 Billion

Puerto Rico's banks have outperformed recently, as the upcoming bond issue looks like it will exceed initial expectations, pulling in as much as $3 billion and providing the commonwealth two years of funding leading into the planned balanced budget in 2016.

Sterne Agee bullish on Puerto Rico banks

“We believe the surge is due to investors' increasing comfort level with the government's pending bond issue (de facto bailout) together with the group's cheap valuations,” write Sterne Agee analysts Todd L. Hagerman and Robert Greene. “Risk/reward remains favorable at current levels in our view.”

Interest in the bond offering...