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Debt issued by Puerto Rico tumbled on Monday in a heavy trading session, with one bond sold just before the island fell into economic despair in 2014 and owned broadly by hedge funds sliding to its lowest level on record.

Investors in the US territory, which is mired by a $69bn debt burden, vastly underfunded pension system and a near decade of recession, have watched as the island’s bonds have dropped in value since late last week when a control board signed off on a new fiscal plan that envisions lower bondholder payouts.

A $3.5bn general obligation bond sold in 2014 that was the largest junk bond ever sold in the $3.7tn municipal bond market briefly slid to a low of 61.35 cents on the dollar, down from 66.5 cents on Thursday and a high for the year of 73.5 cents, according to data from the Municipal Securities Rulemaking Board.

The new plan, proposed by governor Ricardo Rosselló and certified by the board, would increase taxes, cut expenses, reform the pension system and reduce healthcare spending. The plan will be the cornerstone of the government’s restructuring talks as it begins negotiations with creditors.

Copyright The Financial Times Limited 2017. All rights reserved.

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