In the article which was published in The Wall Street Journal 2015 by Mike Cherney with the title Apple Boosts Size of Bond Deal to $6.5 Billion, he explains to his readers how Apple Inc. sold $6.5 billion in bonds with an annual interest rate of 3.5%. He points out how Apple made an immediate move to capture the debt market after it announced an increased profits of 38% in the previous quarter. Apple made a similar issue in April 2013 that was worth $17 billion and where a 30 year bond would give a return of 3.9% to the investor.
He further goes on to explain how the demand for the debt market still persists despite its lagging speed as compared to the global growth. Investors still see bonds as a safe means of earning good and steady profits. The bonds were issued along with notes that had the range of maturity between 5 to 10 years. The investors are disappointed with the reduction of expected returns from the debt investments while Wall Street forecasted an increase in the interest rates from the given fact that US economy is slowly gaining momentum. He also brings across the fact that Apple has returned a substantial amount in forms of buy backs and dividends. With an increased demand from the buyers the company went ahead and increased the offer from $5 billion to $6.5 billion.
Generally the corporate bonds are secured to the Treasury which witnessed a lower rate of returns. But when the optimum yield was compared to the Treasury’s benchmark, Apple’s sale earned a higher profit. For example, a 10 year note would prove to be more profitable by 0.85% as compared with the Treasury. The firms instead of going to the bank for loans approach investors where if they hold a good credit rating, people usually buy bonds from them and in this case Apple seems to have made the most of it.
Finally the author concludes the article with the fact that few investors are tensed about the yields from the corporate bonds which is directly dependent on the overall growth of the US economy. The investors will have to wait and watch as to how much benefit they will make with this investment decision.
Works cited:
Cherney, Mike. “Apple Boosts Size of Bond Deal to $6.5 Billion”. Wsj.com. The Wall Street Journal. Web. 2 Feb 2015.
