(Bloomberg) -- Pacific Investment Management Co. and BlackRock Inc. say the entire $3.7 trillion municipal market is at risk should Puerto Rico lose its investment-grade status, even though many funds aren’t obliged to unload bonds cut to junk.

Bondholders got a reminder this week that the commonwealth’s credit rank is in jeopardy. The extra yield investors demand on Puerto Rico debt set a one-month high after Fitch Ratings threatened to lower the Caribbean island to junk by June 30 if it is unable to borrow through financial markets. Puerto Rico is also one step above speculative grade from Standard & Poor’s and Moody’s Investors Service.

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