I doubt that Apple is introducing the latest version of the iPad today to deflect other issues, but it probably helps that people are focusing on the product launch and not the performance of the 30-year bonds issued by the Company back in May!
I was reading Institutional Investor magazine last night and a story had mentioned that the bonds were down 17% since being issued to massive fanfare in May. Investors couldn’t get enough of the bonds as they perceived the puny-sized coupon of 3.85% in a Zero-Rate Fed World to be sufficient to compensate for the risks of holding the bond for the next three decades.
(Apple’s common shares have had a good month recently and are now up 15% since the bonds were issue in May)
To be fair, it is was subsequent decision of Ben Bernanke to utter the word “Taper” which broadsided the bond market, including the bonds of Apple Inc, and had nothing to do with the management of Apple itself.
However, the whole episode points to the risks of blindly buying an investment simply because of a high-profile corporate name and because of a relatively low interest rate environment. Apple can’t do much about the fact that the bull market in bonds which began in 1980 finally came to an end in the summer of 2012. A generation worth of tailwinds has now shifted to mild headwinds.
I wonder if the features of the new iPad are enough to ease the nuisance of being down 17% on a bond position in six months? Well, at least the holders of the Apple 30-year will be getting their first semi-annual coupon payment on November 4th at the whopping coupon rate 1.925%.
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