Microsoft and AT&T also borrow hefty amounts from investors this week
Apple clinched $10bn of debt financing on Thursday as capital market activity remained robust, with Microsoft and AT&T also borrowing hefty amounts from investors this week.
Apple’s latest bond sale follows a bumper start to the year for corporate and bank borrowings, with more than $185bn raised by investment-grade groups in the US, according to Dealogic. This week Microsoft borrowed $17bn in the largest bond offering of 2017, while AT&T sold $10bn of paper.
“The market has been very receptive to the new debt,” said Monica Erickson, a portfolio manager with asset manager DoubleLine. The level of issuance was “beyond what anyone expected”.
New debt has generally advanced in price as investors pour more cash into the asset class. In the past week, $2.7bn flowed into US investment-grade corporate bond funds, lifting year-to-date inflows to $12.4bn, according to Lipper.
Microsoft’s recently issued 2027 notes traded with a yield 78 basis points above a benchmark Treasury on Wednesday, seven basis points below where they were initially issued. Yields fall as bond prices rise.
“The market has been very receptive to the new debt,” said Monica Erickson, a portfolio manager with asset manager DoubleLine. The level of issuance was “beyond what anyone expected”.
New debt has generally advanced in price as investors pour more cash into the asset class. In the past week, $2.7bn flowed into US investment-grade corporate bond funds, lifting year-to-date inflows to $12.4bn, according to Lipper.
Microsoft’s recently issued 2027 notes traded with a yield 78 basis points above a benchmark Treasury on Wednesday, seven basis points below where they were initially issued. Yields fall as bond prices rise.
Investor demand for bonds from Apple was intense. Underwriters, led by Deutsche Bank, Goldman Sachs and JPMorgan, counted orders of more than $36bn for the offering, according to two investors and one banker familiar with the deal. Apple had initially planned to raise between $6bn and $8bn.
Trading volumes are also higher alongside the deluge of debt supply, with a record $38.5bn of corporate bonds changing hands on Tuesday, when Microsoft’s new debt began to trade. Over the past three weeks, volumes have averaged just below $30bn a day, more than 20 per cent above 2016’s daily average.
US companies have issued a huge amount of debt since the turn of the decade, with more than $1tn borrowed each year since 2010. Many companies, including several in the technology sector, have turned to debt markets to finance shareholder returns in an attempt to avoid the tax hit of repatriating cash generated abroad. Apple is flush with cash held overseas.
Trading volumes are also higher alongside the deluge of debt supply, with a record $38.5bn of corporate bonds changing hands on Tuesday, when Microsoft’s new debt began to trade. Over the past three weeks, volumes have averaged just below $30bn a day, more than 20 per cent above 2016’s daily average.
US companies have issued a huge amount of debt since the turn of the decade, with more than $1tn borrowed each year since 2010. Many companies, including several in the technology sector, have turned to debt markets to finance shareholder returns in an attempt to avoid the tax hit of repatriating cash generated abroad. Apple is flush with cash held overseas.
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