Apple Inc. (AAPL) establishes Japanese bond as Abenomics push rates below zero
Apple Inc. (NASDAQ: AAPL) is planning a bond sale in Japan, and that’s no wonder. Interest rates in the Pacific Island chain are lower than almost anywhere else in the world. The Abenomics, the fiscal and monetary reform program pushed by the current Japanese Prime Minister Shinzo Abe, are the direct cause. Tim Cook and Carl Icahn couldn’t be happier for his efforts.
Abenomics Guide Apple’s Decision-Making
Shinzo abe met Apple CEO Tim Cook earlier this week and Apple has affirmed a strong commitment to Japan in recent months. Apple may have sweeping expansion plans in Japan as the country’s economy kicks in with sweeping reforms known around the world as “Abenomics”.
Large-scale money printing and low rates on debt are common around the world, but Japan is associating this with a series of legal reforms and fiscal expansion. Abe is seeks to bring inflation down to 2% and the central bank is going print money until it gets there.
At the beginning of May, the State showed a price increase of 0.2%, far from this objective. It’s a good sign for Apple, however. The lower the inflation, the more likely rates are to stay low for longer.
Apple could be led to use the issuance of Japanese bonds to finance its operations and expansion in the country. Tim Cook announced a new research site near Yokohama last year and may be considering even more investment.
Apple is looking for low rates around the world
As the Fed seeks to raise interest rates in the United States, Apple is keen to take advantage of low rates around the world. The Japanese issue follows a Swiss franc bond sold by the firm earlier this year.
In February Apple sold the two-part bond to Swiss investors. This agreement raised 1.25 billion Swiss francs ($ 1.35 billion).
Moody’s has an Aa1 rating on Apple’s debt. This is the second highest rating awarded by the company, and it puts Apple just behind Germany in terms of default risk.
The Swiss issue was the first for the company, but it is clear that this bond could have been the first in a long series. Apple now manages a massive share buyback which relies on low rates to be worth the money it gobbles up.
Apple has a lot of money in Europe, but relatively little in the United States, and it will have to keep raising capital to pay for this plan back.
This means that sales of debt securities globally may become more common in the years to come. However, such actions involve currency risks. If the company isn’t careful, it could end up footing the bill for the maneuvers of Mario Draghi, Janet Yellen, or one of the others among the group of bankers that control the global money supply.
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