Apple has nearly $100 billion more in cash than debt. So why borrow? Let us explain...
Tech giant Apple Inc. AAPL, -0.01% borrowed $7 billion on Wednesday by issuing corporate bonds, its first such deal in nearly two years.
September typically has been the busiest month of the year for issuance of U.S. high-grade corporate bonds, so investors are ready to put cash to work. Bank of America Merrill Lynch is forecasting $120 billion to $130 billion in fresh supply for September alone.How does the pricing process work? The 10-year portion landed at 78 basis points above Treasurys to yield 2.244%, a drop from 100 basis points earlier in the session, according to a person familiar with the offering. The 30-year slice cleared at 103 basis points over the risk-free benchmark to yield 2.987%, from 125 basis points initially.
While concerns have been raised over the record amounts of debt being issued by U.S. companies, lately a bigger portion of proceeds from new bond issuance has gone toward paying down existing debt at lower rates, thus reducing corporate leverage.
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