Here’s another thing Apple excels at: market timing.
The tech giant raised $6.5 billion Monday by selling its bonds on Wall Street. It’s a huge sum for any company, but it’s especially notable because Monday was the day interest rates on U.S. bonds hit rock bottom — the lowest level since May 2013.
Apple’s finance team might as well belong to the genius bar given the company is paying interest rates as low as 1.55% on its 5-year bond.
“Very few companies can come to market so quickly and get big bond deals like this done so seamlessly,” says Marilyn Cohen, CEO of Envision Capital Management, which specializes in bonds. “People are confident in Apple as both a stock play and bond play.”
Investors who bought Apple’s 30-year bond will be paid an annual interest rate of 3.45%. That’s a lot lower than the rate many home buyers can get on a 30-year fixed mortgage.
Apple did not respond to CNNMoney’s request for comment, but Cohen notes that Apple is clearly watching interest rates closely and knows when to strike and get what amounts to “almost free money.”
This isn’t the first time Apple has had such astute timing in the bond market. The company pulled off what was then the biggest corporate bond issue ever in April 2013. At that point, the yield on the 10-year U.S. Treasury note — the key benchmark against with many interest rates are priced — was below 1.7%.
“They very nearly nailed the top of the bond market then,” says Tim Anderson, managing director of MND Partners. He points out that rates haven’t gotten back to those low April 2013 levels… until just the past few days.
Overall, Apple has tapped the bond market frequently. It has raised $39 billion in the bond market just in the past two years.
The company isn’t hurting for money. It has a mind boggling $178 billion of cash on hand already, but most of that is held overseas. One of the big tax debates in Washington is how much tax Apple should have to pay when it brings that money back to America.
For now, the cheap bond market is allowing Apple — and other companies such as Netflix that also raised money via a big bond issue this week — to raise money without having to tap its overseas reserves.
Apple initially planned to only raise about $5 billion, but there was so much demand Monday that the company raised the amount.
Billionaire hedge fund manger Carl Icahn told CNNMoney recently that investing in Apple is a “no brainer,” but he has been pushing the company to use some of its cash to buy back more stock.
“Carl is probably dancing a jig right now,” Cohen says.