Activity on credit default swaps for Apple Inc. (NASDAQ:AAPL) record bond deal is almost non-existent, according to Reuters’ Melissa Mott. The media company reports that although there are quotes and published prices for CDS, just a few investors have even been trying to create a market in the bonds.
Apple Inc. (AAPL)’s Bonds: Risk Or No Risk?
Experts interviewed by Reuters said Apple Inc. (NASDAQ:AAPL)’s liquidity is actually working against it when it comes to CDS because investors only buy CDS if they believe the credit will fall apart. Since Apple Inc. (NASDAQ:AAPL) has so much extra cash it isn’t likely to default, so there’s little need for CDS.
However, others believe that there are still risks involved in buying Apple Inc. (NASDAQ:AAPL)’s bonds, especially those that mature in 30 years, because the life of a technology company can be quite unpredictable in the long term.
Shorting Apple Inc. (AAPL) Bonds
Other experts told Reuters that the liquidity of Apple’s bonds means it’s easier for investors to simply short the bond rather than the CDS.
Apple began offering the bonds as a way to raise $100 billion in capital to fund share repurchases and dividends. The company doesn’t technically need to raise its debt, but it chose to do it through bonds because the current rates are extremely low.
Also the tech company didn’t want to dip into the $145 billion in extra cash it has. It has said that more than $100 billion of it is offshore and would bring corporate taxes with it if it were repatriated, but many investors believe that Apple would bring that money home if it ended up being short of the interest payments it will have to make on the bonds it offers.