Apple's (AAPL +1.6%) bondholders have lost some $280.6M on paper (somewhat cleverly dubbed an...


Apple's (AAPL +1.6%) bondholders have lost some $280.6M on paper (somewhat cleverly dubbed an "iLoss" by WSJ) since the debt was issued last month as speculation of QE tapering has sent 10-year Treasury yields climbing. Losses on the 10-year "iBond" sat at ~$137M through Tuesday as prices sunk to 97.377 cents on the dollar. The spread to Treasurys has also widened since issuance, Bloomberg says.

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Comments (15)
  • wigit5
    , contributor
    Comments (4365) | Send Message
     
    yes "clever"
    22 May 2013, 10:22 AM Reply Like
  • rrose39
    , contributor
    Comments (1045) | Send Message
     
    WSJ opinion is also cleverly disguised as "news", much like Fox.
    22 May 2013, 10:32 AM Reply Like
  • chopchop0
    , contributor
    Comments (5171) | Send Message
     
    you mean like MSNBC opinion being reported as "news"?
    22 May 2013, 11:07 AM Reply Like
  • rocback
    , contributor
    Comments (1098) | Send Message
     
    No, he meant the WSJ.
    22 May 2013, 11:42 AM Reply Like
  • perryjon
    , contributor
    Comment (1) | Send Message
     
    or CNN
    24 May 2013, 02:48 AM Reply Like
  • Zenith Strategies
    , contributor
    Comments (686) | Send Message
     
    In most cases, the only participants in a corporate bond market sales who are gaining some real economic benefit are the corporations.
    22 May 2013, 10:28 AM Reply Like
  • cshoxie
    , contributor
    Comments (365) | Send Message
     
    This only happens to AAPL bond holders. Buyers should have known the risk going in.
    22 May 2013, 11:59 AM Reply Like
  • nguyenvanphuoc
    , contributor
    Comments (388) | Send Message
     
    I hope SA will continue to update us on what Apple bondholders iLost in comparison to every other investment they might have made.

     

    That would be, in a word, clever.
    22 May 2013, 11:59 AM Reply Like
  • Harmonica2
    , contributor
    Comments (22) | Send Message
     
    The article could have easily lauded Apple for a well-timed bond sale. What is the reason for the bias?
    22 May 2013, 12:30 PM Reply Like
  • wigit5
    , contributor
    Comments (4365) | Send Message
     
    This is an investor website so it's always going to bias towards the investor when applicable maybe?
    22 May 2013, 12:34 PM Reply Like
  • Harmonica2
    , contributor
    Comments (22) | Send Message
     
    Just not AAPL investors.
    22 May 2013, 01:40 PM Reply Like
  • wigit5
    , contributor
    Comments (4365) | Send Message
     
    There are plenty of pro AAPL quips/articles on this site lol just have to read some.
    22 May 2013, 01:46 PM Reply Like
  • HCWHunter22
    , contributor
    Comments (100) | Send Message
     
    The stories by WSJ and Bloomberg calculate the "loss" as if all the bondholders were to immediately sell their bonds on the secondary market. The 30yr. bondholders have actually lost nothing and will continue to receive the 3.88% yield to maturity for the bonds. Of course as interest rates rise, the value of the Apple bonds will fall just like the value OF ALL OTHER EXISTING BONDS! But again, there are NO actual losses unless the bonds are sold before maturity. The workings of the bond markets vis a vie the stock markets are pretty obvious to investors so it's odd that those articles were even written. Bond buyers usually are purchasing income more so than principal appreciation.
    22 May 2013, 05:08 PM Reply Like
  • SAR2401
    , contributor
    Comments (155) | Send Message
     
    Bonds, with a few rare exceptions ("Build America" bonds is one that come to mind), are a zero sum game. You buy a bond to get a certain rate of return. As long as three things occur, you will always be whole:

     

    1. You hold the bond to maturity
    2. The bond doesn't get called
    3.The company behind the bond is still around 30 years from now.

     

    Condition #1 is up to the bondholder. Condition #2 is pretty unlikely, since it's hard to imagine that interest rates will ever get lower than they are today. I suspect Apple will be quite happy to be paying 3.88% 10 years from now. although a bondholder might not be so happy if interest rates are back up to even the historical norm of 6.5%. Regardless, it seems unlikely that Apple will ever call these bonds.

     

    Condition #3 is the tricky one. Everyone who thinks Apple will still be around, making the iPhone 90S 30 years from now, raise your hands. Looking back 23 years to 1990, there sure aren't many tech companies that were making a small line of products that are still around. Some of them merged with other companies or were bought outright, but most of them just filed bankruptcy and disappeared. Maybe Apple will be one of the lucky ones that will be a survivor, but it would take a lot more than a 3.88% yield to make me take that risk, especially when I can get Build America bonds, back by the full faith and trust of the US Treasury and make between 4.5% and 5%. Still, as has been written, it's only people who need to sell today in the secondary market because that yacht payment is due who will take a "loss". As long as all three conditions are met, no bondholder will ever take a loss, at least not n 2013 dollars.
    22 May 2013, 05:56 PM Reply Like
  • rrosey2
    , contributor
    Comments (883) | Send Message
     
    If interest rates go back to 5% or 7%, Apple could make an offer to buy these bonds back, and make a few billion dollars more.
    22 May 2013, 10:01 PM Reply Like
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