Apple Inc’s massive bond sale is fueling speculation that US interest rates are poised to increase.
The iPhone maker issued US$6.5 billion of debt on Monday, locking in borrowing costs for as long as three decades. The sale follows a plunge in benchmark US Treasury yields, with US 30-year yields falling to a record low last week. They might not stay this low if forecasts for the US Federal Reserve to raise rates are correct. Apple’s last sale in 2013 coincided with the record low in company borrowing costs.
“This is the right time to issue corporate bonds,” said Kim Youngsung, the head of overseas investment in Seoul at South Korea’s Government Employees Pension Service, citing Apple as an example. “Interest rates will go up in the middle of this year.”
The company manages the equivalent of US$13.7 billion.
The Treasury 10-year yield was little changed at 1.66 percent as of 6:49am in London trade yesterday, according to Bloomberg Bond Trader data. The price of the 2.25 percent note due in November 2024 was 105-9/32. The yield fell to 1.64 percent on Friday last week, approaching the all-time low of 1.38 percent set in 2012.
Thirty-year yields were at 2.26 percent after dropping to a record 2.22 percent last week.
Cupertino, California-based Apple last sold bonds on April 30, 2013. The US$17 billion issue was the biggest corporate debt offering on record at the time.
Two days later, the US average investment-grade corporate bond yield fell to an all-time low of 2.64 percent, based on Bank of America Merrill Lynch data that go back to 1996. The yield is now 2.90 percent, which compares with the average of 5.38 percent during the period.
Futures contacts indicate that there is a 63 percent chance that the Fed will boost its benchmark to at least 0.5 percent by December, according to data compiled by Bloomberg. Policymakers have kept the target for overnight loans between banks in a range from zero to 0.25 percent since 2008.
It is not a sure thing that US government and corporate bond yields will push higher, said Will Tseng, a portfolio manager in Taipei at Mirae Asset Global Investments Co (未來資產證券), which oversees US$63.9 billion.
“Even if the Fed starts its first rate hike this year, it does not mean the overall interest rate environment will be very high,” Tseng said. “The policy rate is still lower than 1 percent. I do not think corporates should be afraid of a higher-rate environment,” including Apple, he said.
AI REVOLUTION: The event is to take place from Wednesday to Friday at the Taipei Nangang Exhibition Center’s halls 1 and 2 and would feature more than 1,100 exhibitors Semicon Taiwan, an annual international semiconductor exhibition, would bring leaders from the world’s top technology firms to Taipei this year, the event organizer said. The CEO Summit is to feature nine global leaders from Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), ASE Technology Holding Co (ASE, 日月光投控), Applied Materials Inc, Google, Samsung Electronics Co, SK Hynix Inc, Microsoft Corp, Interuniversity Microelectronic Centre and Marvell Technology Group Ltd, SEMI said in a news release last week. The top executives would delve into how semiconductors are positioned as the driving force behind global technological innovation amid the artificial intelligence (AI) revolution, the organizer said. Among them,
Demand for artificial intelligence (AI) chips should spur growth for the semiconductor industry over the next few years, the CEO of a major supplier to Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) said, dismissing concerns that investors had misjudged the pace and extent of spending on AI. While the global chip market has grown about 8 percent annually over the past 20 years, AI semiconductors should grow at a much higher rate going forward, Scientech Corp (辛耘) chief executive officer Hsu Ming-chi (許明琪) told Bloomberg Television. “This booming of the AI industry has just begun,” Hsu said. “For the most prominent
Former Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) chairman Mark Liu (劉德音) yesterday warned against the tendency to label stakeholders as either “pro-China” or “pro-US,” calling such rigid thinking a “trap” that could impede policy discussions. Liu, an adviser to the Cabinet’s Economic Development Committee, made the comments in his keynote speech at the committee’s first advisers’ meeting. Speaking in front of Premier Cho Jung-tai (卓榮泰), National Development Council (NDC) Minister Paul Liu (劉鏡清) and other officials, Liu urged the public to be wary of falling into the “trap” of categorizing people involved in discussions into either the “pro-China” or “pro-US” camp. Liu,
Minister of Economic Affairs J.W. Kuo (郭智輝) yesterday said Taiwan’s government plans to set up a business service company in Kyushu, Japan, to help Taiwanese companies operating there. “The company will follow the one-stop service model similar to the science parks we have in Taiwan,” Kuo said. “As each prefecture is providing different conditions, we will establish a new company providing services and helping Taiwanese companies swiftly settle in Japan.” Kuo did not specify the exact location of the planned company but said it would not be in Kumamoto, the Kyushu prefecture in which Taiwan Semiconductor Manufacturing Company (TSMC, 台積電) has a
RSS