By Mike Cherney
Microsoft Corp. is outshining Apple Inc. in at least one area:
the bond market. Microsoft on Monday is selling $10.75 billion in
new bonds, making it this year's largest U.S. corporate debt sale,
following Apple Inc.'s $6.5 billion deal last week.
Reflecting good demand for its bonds, Microsoft--one of the few
companies that still retains a triple-A credit rating--increased
the size of its bond sale from $7 billion, according to S&P
Capital IQ LCD. The company is selling bonds with maturities
ranging from five to 40 years.
Investors expected big companies like Microsoft, Apple and Merck
& Co.--which sold $8 billion in bonds last week--to tap the
bond market in size this year. Companies are taking advantage of
attractive borrowing costs amid the low-rate environment, and
investors are looking for securities that offer higher yields, like
corporate bonds, than benchmark government debt.
The bond sale Monday is Microsoft's first since April 2013,
according to data provider Dealogic. The company said it would use
proceeds from the sale for general corporate purposes, which could
include stock buybacks, capital expenditures and repaying existing
debt. Moody's Investors Service noted the company plans to complete
its remaining $31 billion share buyback program by the end of
December 2016.
The bond sale Monday "fits the pattern of investment-grade
corporate issuers who, even if they don't need to raise capital,
are taking advantage of very, very favorable financing terms," said
Jim Kochan, chief fixed income strategist at Wells Fargo Funds
Management.
The 10-year Treasury bond on Monday was trading at a yield of
around 1.94%. That's higher than the 1.64% it hit last month, but
lower than the 3% it was trading at toward the end of 2013.
Microsoft is shopping its bond at lower relative yields than
Apple's sale last week. On Monday, Microsoft offered a 10-year bond
to yield 0.75 percentage point more than benchmark Treasurys.
Apple, which is rated one notch below Microsoft at double-A-plus,
last week sold 10-year bonds to yield 0.85 percentage point more
than Treasurys.
Write to Mike Cherney at mike.cherney@wsj.com
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