Apple's Bonds Are Acting More and More Like Government DebtBy
Sale of $5 billion of bonds mimics U.S. curve: Intellectus
Narrow risk premium suggests duration more akin to government
Investors casting about for safe options as U.S. lawmakers hurtle toward a debt-ceiling showdown seem prepared to designate Apple Inc. bonds as the new Treasuries.
The iPhone maker can’t print its own currency like the U.S. government does, but it’s certainly approaching something akin to favored-nation status in the debt markets. Apple’s sale of $5 billion of bonds Tuesday was even designed to mimic the U.S. government curve, with benchmarks for repeat issuance of debt due in two, five, 10 and 30 years, according to Ben Emons, chief economist at Intellectus Partners LLC.
Moreover, the narrow risk premiums on Apple’s bonds suggest duration that’s more like government than corporate peers, according to Emons, with bigger compensation for risk of future Federal Reserve rate hikes than for the chance of default.
That may not be surprising, given Apple’s ample coffers. It generates more cash than any other public U.S. company.
— With assistance by Cormac Mullen