Apple Bonds Stick Buyers With $280.6 Million Loss as Rates Climb

Apple Bonds Stick Buyers With $280.6 Million Loss as Rates Climb

Apple Inc. (AAPL)’s bonds have lost $280.6 million of market value since buyers snapped up $17 billion of the iPhone maker’s debt last month, declining as yields climb from record lows.

The iPhone maker’s $3 billion of 30-year, 3.85 percent bonds, issued at 99.418 cents on the dollar, dropped 4.3 cents through yesterday to 95.145 cents on the dollar since the April 30 offering, creating a loss of $128.2 million and pushing the yield on the bonds to 4.1 percent, according to data from Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Buyers of the biggest corporate-bond offering ever are losing as speculation the Federal Reserve may start scaling back its unprecedented stimulus efforts triggers the biggest increase in 10-year Treasury yields in 12 months. Average yields on dollar-denominated investment-grade bonds have climbed to 2.78 percent from 2.68 percent since Apple’s April 30 debt sale, the Bank of America Merrill Lynch U.S. Corporate Index shows.The company’s $5.5 billion of senior unsecured 2.4 percent notes due in 2023, which were issued at 99.867 cents on the dollar, have sunk to 97.377 cents through yesterday, Trace data show. That implies a loss of $137 million from issuance, Bloomberg data show. The yield climbed to 2.7 percent and the extra yield investors demand to hold the debt instead of similar-maturity Treasuries widened to 76.5 basis points from 75 at issuance.

The only bonds sold last month by Apple that gained were those that pay floating-rate coupons. The securities have increased $6.7 million in market value since the offering, Bloomberg data show.

Apple’s $2 billion of floating-rate securities due in May 2018, which pay 25 basis points more than the London interbank offered rate, climbed 0.3 cent to 100.3 cents on the dollar from their issuance price, Trace data show.

To contact the reporter on this story: Mary Childs in New York at mchilds5@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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