Apple Inc. (NASDAQ:AAPL) will disclose its earnings on Tuesday, which will see one full quarter when California based iPhone maker announced to issue debt to finance shareholders return.


On April 30, Apple Inc. (NASDAQ:AAPL) introduced its record $17 billion deal, after one day when Pimco’s Bill Gross said that bull markets in bonds are at their top. The 10 year Treasury note declined to a yield of 1.64 percent after Apple sold its debt. On Monday, the yield surged 2.48 percent, when investors were expecting that Federal Reserve withdraw its easy monetary policy, says a report from MarketWatch.

Investors did right by holding onto Apple bonds

“They absolutely nailed it in terms of timing both from a rate perspective and a spread perspective. The all-in cost of funds hit the lows for sure,” said Jesse Fogarty, managing director at Cutwater Asset Management, who holds some Apple bonds.

According to MarketAxess data, 10 year fixed rate Apple Inc. (NASDAQ:AAPL) bonds had a yield of 2.40, further surged on Monday to 3.19 percent. Investors earned a total negative return due to rise in yields, but the gap between Apple bonds and comparable treasury’s came down.

The 10-year bonds were issued at 75 basis points above the 10-year Treasury note, but the spread declined to 71 basis points on Monday.

Fogarty said that they have performed well from relative value point of view. He added that investors took wise decision to hold Apple Inc. (NASDAQ:AAPL) bonds than Treasury’s during the selloff.

Peer Comparison

Apple Inc. (NASDAQ:AAPL) bonds have performed well compared to its peers like Microsoft Corporation (NASDAQ:MSFT), which also issued debt in the previous week, as per the data of MarketAxess. On Monday, Microsoft bonds were at 3.21 percent, which is more than its competitors, even though it sold its 10 year bonds at a yield of 2.375 percent. 10 year debt of Microsoft was issued at 70 basis points over comparable treasuries though it traded at 74 basis points more than the Government debt.

Both Apple Inc. (NASDAQ:AAPL) and Microsoft are leaders in high grade corporate debt market where rate surged due to Treasury sell off but later stabilized.

Fogarty said that the market is performing in a more stable way since the end of June, from the point of view of captive investment grade buyers. “The higher quality stuff has outperformed.”