Apple’s corporate bond holdings drop for first time since 2013

Bloomberg

A whale in the corporate bond market is going on a diet.
Apple Inc.’s holdings of company debt shrank in the latest quarter for the first time since 2013, as the maker of the iPhone adjusts to new tax laws. The tech company held about $136 billion of corporate bonds as of the end of March, representing about half its pile of cash and securities, according to a filing this week. Its holdings of mortgage bonds and asset-backed securities also fell, the filing showed.
Bloomberg reported in February that Apple had been pulling back on buying corporate bonds with its overseas cash, based on people familiar with the matter. Now it’s showing up in the company’s numbers, as its holdings of the debt fell to their lowest level since 2016. Apple may be divesting its holdings or may just be letting the securities mature without reinvesting.
The new US tax law is likely to end a strange debt circle that helped fuel purchases and sales of corporate bonds for years. Previously, companies with extensive profit earned overseas, like Apple and Alphabet Inc., would end up being both big buyers of corporate debt and big issuers of the obligations.
The buying stemmed from the money the companies had earned abroad that would be taxed if it were brought back to the US Instead, they would invest at least some of that money in short-term corporate bonds. Those companies would also borrow in the US corporate bond markets to fund share buybacks and other cash needs. Apple was the third-largest issuer of corporate bonds last year.
Under new laws, there’s no benefit to keeping money overseas, meaning companies like Apple can just move profit back to the US without the bond markets intermediating. The effects of that change are showing up in corporate debt markets.