Apple Bonds: Buy or Stay Away?

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Apple’s (NASDAQ:AAPL) enormous and unprecedented $17 billion bond sale helped the Cupertino-based company to raise funds for its $100 billion shareholder capital return plan. The sale also had a beneficial spillover effect for the banks that assisted in the deal. However, are the bonds truly a wise investment or are these low-yielding papers just another over-hyped product from Apple?

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Many professional traders are advising their clients to avoid bonds and keep investing in stock. On the other hand, Apple received an Aa1 senior unsecured rating from Moody’s and a similar AA+ rating from S&P. Despite the inherent volatility of the technology market, Apple’s high credit rating can be justified thanks to its enormous cash reserves. However, with yields on 10-year Treasury bonds recently falling to 1.64 percent, is Apple really providing a substantially better return?

It’s also not clear how much of a value will be left for the average investor after Apple’s bonds are divvied up and sold at a higher price through large banks like Goldman Sachs (NYSE:GS) and Deutsche Bank (NYSE:DB). Other investors are wondering if the company will even exist by the time its 30-year debt matures.

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