Bond Insurers Lure Bulls Following Puerto Rico Default
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Bad news for Puerto Rico may be good news for Assured Guaranty Ltd., as options traders bet the bond insurer will withstand a possible default by the island’s main electricity provider.
Assured, which backs $852 million of debt issued by the Puerto Rico Electric Power Authority, has seen its shares decline 13 percent since June 19. Trading in the options market is signaling a rebound, with calls trading near the most expensive level to puts in 20 months. The contract with the highest ownership is betting on a 29 percent rally by January, data compiled by Bloomberg show.