What’s Depressing Apple Inc. (AAPL)’s Shares?

Cause no. 2:  Bonding with Apple

For the first time, Apple Inc. (NASDAQ:AAPL) issued debt on Apr. 30, in a total amount of $17 billion. Part of the issuance was for a 30-year period. It’s no secret that Apple’s bonds have lost more than 10% of their value. Because the bonds were offered when interest rates were near historic lows, they have been especially sensitive to interest rate swings. In addition, Apple’s $106 billion in long-term marketable securities is invested mostly in long-term U.S. Treasury, U.S. agency, municipal, corporate, and mortgage-backed bonds. This means that these investments are just as vulnerable to the bond market’s recent decline as Apple Inc. (NASDAQ:AAPL)’s own bond offerings have been. In other words, Apple got hit twice. First, by its long-term investments, and second by the deteriorating price of its bonds that is scaring shareholders away.

I believe that the decline in the price of bonds should also be taken in perspective. First, Apple Inc. (NASDAQ:AAPL) isn’t the only tech company that’s sitting on piles of cash invested in U.S bonds. Microsoft Corporation (NASDAQ:MSFT) is currently sitting on a $70 billion stash, part of it is certainly invested in U.S treasuries, considered a “safe heaven.” Put simply, the problem isn’t unique to Apple. Second, there’s nothing really wrong with apple’s bonds losing steam. Quite the contrary – Apple Inc. (NASDAQ:AAPL) successfully completed its debt round at the best price possible. If it wishes, it can now redeem the bonds at a much better (cheaper) price. This will create a capital gain to Apple, not a capital loss. Not many people grasp this concept.

The Fool looks ahead

Apple Inc. (NASDAQ:AAPL) is here for the long haul. The temporary decline in the price of its bonds as well as its loss to Samsung on the patent infringement suit, will not change that. I recommend to investors to take these two events in the right perspective. Simply do nothing. Sit back and enjoy the ride.

The article What’s Depressing Apple’s Shares? originally appeared on Fool.com.

Shmulik is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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