‘Reverse Yankee’ Bonds Big Winners for US Companies. But Who Are the Losers?

The ECB-designed game of absurdity hits its target.
Apple is doing it, everyone is doing it: US companies are issuing record amounts of bonds denominated in euros. On Thursday, Apple announced in an SEC filing that it would issue 2.5 billion in euro bonds, the proceeds of which will be used to fund share buybacks and dividends to be paid in dollars. These bonds will come in two tranches: 1.25 billion of 8-year notes and 1.25 billion of 12-year notes, with coupon payments of 0.875% and 1.375% respectively.
Yields are not yet established since the bonds have not been priced yet. But they will likely not be far off from the coupon. And they won’t even compensate investors for the loss of purchasing power based on the current rates of inflation: 2.2% in the US and 1.9% in the Eurozone.
Yet, demand is hefty in yield-starved euro land, where the ECB has imposed its negative interest rate policy (NIRP) on investors and is buying 60 billion a month in all kinds of paper assets: Underwriters have received over $5 billion in orders for those Apple notes.

This post was published at Wolf Street by Wolf Richter ‘ May 21, 2017.