Apple Inc. (NASDAQ:AAPL) is one of many companies which are saving billions of dollars in interest thanks to the monthly stimulus payments provided by the Federal Reserve. Bloomberg estimates that companies are saving approximately $700 billion in interest payments because the Fed is buying $85 billion worth of corporate bonds every month.
Apple saves $15.4 million for every $1 billion borrowed
Lisa Abramowicz of Bloomberg reports that companies like Apple Inc. (NASDAQ:AAPL), Verizon Communications Inc (NYSE:VZ) and more than 2,000 other large corporations are saving as much as $15.4 million a year for every $1 billion they borrow.
Brook Asset Management was up 7.27% for the first quarter, compared to the MSCI GBT TR Net World Index, which returned 3.96%. For March, the fund was up 1.1%. Q1 2021 hedge fund letters, conferences and more In his March letter to investors, which was reviewed by ValueWalk, James Hanbury of Brook said returns during Read More
They’ve been taking advantage of the Fed’s quantitative easing program by locking in interest rates that are at a record low, extending maturities and raising cash through the sale of bonds. Bloomberg data shows that companies have sold $5.16 trillion worth of bonds during the course of the program.
Apple, Verizon roll out bond offerings
Apple Inc. (NASDAQ:AAPL) announced a $17 billion bond sale in April, which at that time was a record amount. That was the company’s first sale since 1996, and it included $4 billion worth of five year notes at 1 percent and $5.5 billion worth of 10-year notes at 2.4 percent.
Verizon Communications Inc (NYSE:VZ) topped that amount by issuing $49 billion in bonds starting this month. It will come in eight parts and marks the largest sale in history. The company is doing offering the bonds to pay for its $130 billion acquisition of the rest of its Verizon Wireless joint venture from Vodafone.
Impacts of quantitative easing
When the program started in 2008, unemployment was at the highest level in 26 years. It peaked in October 2009 at 10 percent, and many economists attribute growing consumer confidence in the economy to the stimulus program. However, Fed Governor Jeremy Stein said earlier this year that excessive risk taking within the corporate debt market and some other credit markets was becoming a problem. Corporate debt loads on U.S. companies have risen more quickly than cash flow over the last six consecutive quarters.
The Fed may announce any day now that it plans to start tapering the program. When that happens, it will send shock waves throughout the markets.