Apple doesn't really need money from the bond market. The company's cash reserves regularly reach hundreds of billions. The company has just reported on its second fiscal quarter, which ended at the beginning of April. Operating cash inflows in the three months alone: $29 billion. The most valuable company in the world continues to be a machine for printing money.

Daniel Mohr

Editor in business.

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Apple shareholders have been benefiting from this for years. But bond investors also get a piece of the pie. In the low-interest phase, it was said: Sure, Apple uses its strong credit rating to get more money cheaply. But even now, in May 2023 and a completely different interest rate world, Apple has entered the bond market this week. The company wanted to raise a good 5 billion dollars and was thrown the money with the kiss of the investors.

This is because interest rates are still a little higher than US government bonds. This is a point that has been eagerly discussed in the market. Isn't Apple perhaps even the more stable, solvent debtor than the American state? At the moment, there is a lot of controversy in American politics about raising the debt ceiling. At the end of the month, the state threatens to run out of money if it is no longer allowed to incur new debts. The bond markets are still calm. After some sabre-rattling, an agreement has still been reached in similar cases so far. Some investors, however, prefer to lend their money to a company like Apple that is not exposed to such risks. Others argue that if the U.S. government were to become insolvent, it would hit the entire stock and bond markets with force and would not let Apple securities get off scot-free.

Less than inflation, but better than Germany and the US

The bottom line is that Apple pays at least 4 percent interest on each of its five newly issued tranches. For three years it is 4.4 percent, for five years 4 percent, for seven years 4.15 percent, for ten years 4.3 percent and for thirty years 4.85 percent. The initial interest rates were even slightly higher, but the demand for the securities was so great that in the end these interest rates came out. Given current inflation rates of 7 percent in Europe, 4 percent is not exactly much, but it is always a question of alternatives.

The Federal Republic of Germany has just increased its bond maturing in 2053. The coupon is only 1.8 percent, and considering the price level, which has fallen to 88 percent since the issue, an annual yield over the term of currently 2.5 percent is calculated (see table). The American state currently pays 3.5 percent for ten years. Apple delivers one more schnapps. The exchange rate must be taken into account. Apple will pay the coupons in dollars, and the repayment will also be made in the American currency. The past year in particular has shown that exchange rates can have a significant impact on returns. The dollar gained strongly. This year it is weaker again. Markets are expecting current US interest rates to be close to their highs, while Europe still has some way to go upwards, which is currently helping the euro.

If Apple's 4 to 4.8 percent is not enough for you, you can also find other large US corporations that have just financed themselves on the bond market. The pharmaceutical company Merck & Co is a bit higher than Apple with its coupons, the Facebook group Meta offers a little more. Here, too, five tranches came onto the market. Meta pays 4.6 percent for five years, 4.8 percent for seven years, 4.95 percent for ten years, 5.6 percent for the long maturities of forty years, and 5.75 percent for fifty years.

The advantage of American issuers is that they usually divide the bonds in a private-investor-friendly manner and are often easily tradable on German stock exchanges. Large European companies do not use the bond market quite as much, and their securities are often only available in large denominations of 100,000 euros or are completely excluded from trading for private investors due to regulatory reasons. Among the new issues, however, there have recently been a few names that could be of interest to investors, such as the French retailer Carrefour, which pays an annual coupon of 2030.3 percent until October 75, or the Munich-based truck group Traton with its Scania and MAN brands, which pays creditors 2025 percent annual interest until September 4.

Some experts think it is worthwhile to look beyond the euro and dollar area for bonds. The J.P. Morgan GBI-EM index includes bonds in twenty emerging markets with an average credit rating of BBB. The index achieved a return of 2002 percent per year between 2019, when the index was first created, and 7; the U.S. Treasury Index was up 3.6 percent. Over the past three years, however, emerging market debt has fallen somewhat due to the pandemic, a strong dollar and high inflation in many emerging markets. Among others, the experts of the French Ofi Invest Asset Management now see a trend reversal for the emerging markets, led by countries such as Brazil, Peru or Indonesia, which could benefit from rising prices for raw materials that are urgently needed in the energy transition.