On Monday, Apple Inc. joined a growing list of borrowers in the US bond market by issuing $5.25 billion in five parts. The proceeds will be used for general corporate purposes such as stock buybacks, dividend payments, working capital, capital expenditures, acquisitions, and repayment of debt. The longest portion of the bond, a 30-year bond, will yield 108 basis points over comparable Treasuries, which is lower than the initial expectations of 135 basis points. This sale marks Apple's first issuance since August 2022, when it sold $5.5 billion for buybacks and dividends.
The market is expected to see $30 billion to $35 billion of US high-grade bond sales this week as corporate debt markets begin to stabilize. T-Mobile and Merck also issued $3.5 billion and $6 billion in bonds, respectively. The decision of Apple to issue billions in new debt is due to its confidence in expanding cash flow rather than operational needs, according to Robert Schiffman, a senior credit analyst at Bloomberg Intelligence. The issuance of the five-tranche bond should further benefit the company's net-cash-neutral goal.
Invesco's Chief Fixed Income Strategist, Rob Waldner, said on Bloomberg TV that the deal is expected to be very well received by the market. He added that there has been significant demand for high-quality fixed income. Meta Platforms Inc., the parent company of Facebook, also raised $8.5 billion in its second-ever bond sale last week.
In conclusion, Apple's bond issuance is part of a broader trend of companies raising funds ahead of key inflation readings later this week. With the proceeds going towards general corporate purposes, it is a clear indication of the company's confidence in its ability to expand cash flow.
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