(Bloomberg) -- Puerto Rico’s general-obligation debt, already graded one step above junk, may be cut by Moody’s Investors Service if the island commonwealth’s finances continue to deteriorate and it isn’t able to access credit markets soon.

The decision affects $52 billion of rated debt, Moody’s said. Puerto Rico’s securities are held by more than three- quarters of mutual funds that invest in municipal bonds, according to Morningstar Inc. in Chicago. A rating cut may lead funds to sell some of those holdings.

Moody’s cited the commonwealth’s “weakening liquidity, increasing reliance on external short-term debt, and constrained market access, within the context of a weakened and now sluggish economy,” the company said in a statement. “These developments exacerbate the longstanding financial strain brought by the commonwealth’s very high debt load and pension obligations, as well as its chronic budget deficits.”

All three major rating companies grade the securities one step above non-investment level, with a negative outlook.

The commonwealth’s bonds have lost 18.5% this year, the most since at least 1999, and more than seven times the decline in the broader muni market, Standard & Poor’s total return data show.

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