Last spring, not a whole lot was going right for Apple. Its shares had fallen as much as 44 percent from a high the previous summer, its profit declined for the first time in a decade, and investors frustrated with the pace of innovation at the company were clamoring for Apple to return to them some of the profits that the company was parking overseas. Chief executive officer Tim Cook acceded by announcing a $100 billion plan to return cash to shareholders.
To pay for it—and to leave those overseas profits where they were, untaxed—Apple tapped the debt market for the first time in 17 years. It did so on April 30, 2013, and its timing turned out to be essentially perfect.
The $17 billion Apple borrowed, at that time the largest issuance in corporate history, came as the yield on 10-year U.S. government debt was falling to 1.67 percent, near historic lows. The rate shot up immediately afterwards, with bond legend Bill Gross declaring that a 30-year bull market for bonds had probably ended April 29. Had Apple waited just a month, it would have paid $724 million more to borrow the same amount, Bloomberg News calculated in June, and the yield on the debt kept rising until September. Since the financing, Apple has added more than $100 billion to its market cap.
Now Apple is poised to tap the debt markets again, with a “similar”-sized offering, the company said last week, as it continues to buy back shares. It’s expected to price the bonds today, Bloomberg News reports, in a seven-part issuance with maturities ranging from three to 30 years. Apple may be trying to duplicate its magic touch, locking in rates ahead of a two-day meeting of Federal Reserve officials that starts today. Last month, the Fed released data that sent bond yields up—making borrowers pay more—before new chair Janet Yellen spoke up to clarify the central bank wanted to keep rates low. Economists surveyed by Bloomberg expect the Fed to announce another reduction in its monthly bond purchases after the meeting concludes. Also on the horizon: the federal jobs report will be published Friday, giving new information on the state of the economic recovery.
