Apple Inc. (NASDAQ:AAPL) made a record bond offering to finance its new capital plan, but Warren Buffett says he isn’t biting. In fact, he said in an interview with Bloomberg Television over the weekend that his Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) won’t be investing in any corporate bonds because their yields are too low.
A quarterly filing released on May 3 indicates that Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) held $12.2 billion in corporate bonds at the end of March, which is a 14 percent decrease from two years ago. Debt yields from corporate bonds and Treasuries have fallen along with the interest rates as the Federal Reserve purchased the bonds as a way to inject cash into the economy.
The Bank of America Merrill Lynch U.S. Corporate & High Yield Index indicates that the yield on company debt dominated by the dollar dropped to a record low of 3.35 percent last week. That’s compared to the average of 5.87 percent over the last 10 years.
Apple Inc. (NASDAQ:AAPL)’s plan involves the offering of bonds on order to return $100 billion to shareholders by 2015. The company is selling $4 billion of 1 percent, 5-year notes which will pay 40 basis points. That’s still higher than Treasuries which carry a similar maturity.
Apple Inc. (NASDAQ:AAPL) is also offering $5.5 billion of 2.4 percent, 10-year securities with a 75-basis point relative yield and $3 billion worth of 3.85 percent, 30-year bonds paying 100 basis points.
Corporate bonds like the ones Apple Inc. (NASDAQ:AAPL) is selling in its latest bond offering have been perhaps the most popular investment strategy since the financial crisis hit in 2008. In just a single year, the S&P 500 fell approximately 38 percent, making stocks a risky investment.
Shares of Apple Inc. (NASDAQ:AAPL) have rallied since the bond offering was announced, rising from below $400 per share almost to $450 per share. This morning in pre-market trading, the stock rose as much as 1.37 percent, coming up just shy of the $450 mark to $449.98 per share. Shares traded above $450 per share for most of the trading day on Friday.