Apple et al take advantage of US tax cuts, hurting other companies’ borrowing power
The cash-rich tech giants parked an increasing amount of their wealth into corporate debt in recent years
New York — As US tax cuts prompt Apple and other tech companies to bring home their overseas cash hoards, it’s leaving a void in the market for short-term corporate bonds, where those firms had invested much of the money. That’s now making it more expensive for other companies to borrow. Once the biggest buyers of short-dated corporate debt, Apple along with 20 other cash-rich companies including Microsoft and Oracle have turned into sellers. While they once bought $25bn of debt per quarter, they’re now selling in $50bn clips, leaving a $300bn-a-year hole in the market, according to data tracked by Bank of America strategists. The reversal is adding pressure to a market already buffeted by US Federal Reserve rate hikes. Yields on corporate bonds with maturities between one and three years have jumped 0.85 percentage points this year to 3.21%, close to the highest in almost eight years, Bloomberg Barclays index data shows. This increase has happened at a faster pace than longer-dated...
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