Did Icahn’s Position Disclosure Hurt Apple’s Bonds?
Last week billionaire investor Carl Icahn sparked a surge in Apple’s (NASDAQ:AAPL) stock price with his disclosure that he has a “large position” in the company. Although Icahn’s Apple tweet boosted Apple’s stock value, it also may have had less of a positive impact on the Cupertino-based company’s bonds. Icahn’s recent discussions with Tim Cook suggested that Apple may significantly increase its share buyback program.
This was widely seen as a negative for Apple’s credit and the news soon affected the basis point spread of the tech company’s bonds. Investors who bought into Apple’s $17 billion bond offering in April continue to take losses thanks to the widening yield spread. According to MarketAxess data cited by MarketWatch, Apple’s 10-year bond spread widened to 92 basis points by August 20. Apple’s 10-year bonds were originally issued at 75 basis points.
“Basically if you own this paper, you’re sitting on it for three years or selling at a loss,” First Investors Management senior portfolio manager Rajeev Sharma told Reuters. Apple issued $5.5 billion worth of senior unsecured 2.4 percent 10-year bonds in April.
The 10-year bond spread jumped from 85 basis points on August 12 to 88 basis points on August 13, soon after Icahn’s tweet. The spread even hit 94 basis points on August 14 before leveling off to 92 points on Tuesday.
However, not all of the volatility in Apple’s bonds can be attributed to Icahn’s influential tweet. The recent yield percentage increase for Apple’s bonds was also likely due to concerns about the overall economy. The interest rate increase also caused benchmark Treasury yields to move upwards last week.
Here’s how Apple has traded so far this week.
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