Governor Alejandro Garcia Padilla has said the island is unable to repay $805 million of principal and interest due July 1 on the securities, which have the highest legal priority, and also continue providing essential services for the island’s 3.5 million residents. Those payments are part of $2 billion owed by Puerto Rico and its agencies next month.
Illinois remains without education funding. And for CPS, the situation is particularly dire. The district is facing a $1 billion budget deficit and must come up with a $676 million pension payment by the end of the month.
Chicago’s more than $20 billion of unfunded liabilities led Moody’s Investors Service to cut its rating to junk in May 2015, causing investors to demand higher yields as the city sold more than $3 billion of bonds. While Chicago has since enacted a record property-tax increase for police and firefighters pensions, it’s still not paying enough to keep its debt to those funds from growing, nor has it put in place a plan to cut the cost of its other pensions after previous changes were thrown out in court.
Reserves last month fell by $27.93 billion to $3.192 trillion, erasing $17 billion worth of gains in March and April, central bank data released Tuesday showed. As reserves fall, China’s soaring debt and flagging growth heighten the risk for capital outflows.
“We acknowledge the government’s fiscal situation … but there is no way we can continue to offer our services with inconsistent payments and fees that are unsustainable,” said Aeromed director Jose Hernandez. A growing number of companies in Puerto Rico are suspending services because of mounting government debt amid a 10-year economic slump.
As a result, the report says: “The trend of China’s leverage has probably deteriorated faster than we previously thought.” According to the report, the surge in shadow lending is likely to see China’s total debt level climb to close to 350 per cent of GDP by 2020. Previously Goldman Sachs had forecast that China’s debt to GDP ratio would be just under 300 per cent by 2020.
Households are now carrying a debt level that is equivalent to 162 per cent of their annual disposable income – higher than the level reached before the global financial crisis.
The average yield on German government bonds has fallen below zero for the first time as the phenomenon of negative interest rates intensifies across global financial markets.
Average yields on corporate notes from Asian firms have slid 77 basis points this year to 3.76 percent, the lowest in data going back to 1996, according to Bank of America Merrill Lynch indexes.
Companies benefiting from the lower borrowing costs are issuing bonds at an increasing clip. More than 50 billion euros ($57 billion) were sold in the single currency in May, the second-busiest month on record. Air Liquide SA, the investment-grade French industrial gas maker, issued 3 billion euros of bonds on Monday, with just one of five parts of the deal priced with a coupon above 1 percent, according to data compiled by Bloomberg.
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