Apple is cutting back on the purchasing of corporate bonds as it prepares to bring home overseas cash. Changes to tax laws in the United States mean Apple no longer needs to hold so much money in foreign countries. Alphabet and Oracle are also cutting back.
U.S. tech companies are the biggest hoarders of cash overseas. Apple alone holds much of its $285 billion abroad, and around $157 billion of that is invested in corporate debt. But now that U.S. companies have an incentive to repatriate foreign money, that’s going to change.
Apple will spent less on corporate debt
Some analysts expect many U.S. companies to bring home or use most of their overseas cash by 2020. Corporate bond investors have been preparing for a market with fewer buyers since the new U.S. tax law was introduced in late 2017.
Apple is already on its way toward closing down its bond buying. Bloomberg, citing people familiar with the matter, reports Apple is “pulling back on buying corporate bonds with its overseas cash as it prepared to bring the money home to the U.S.”
Alphabet and Oracle are doing the same, Bloomberg adds, resulting in a potential impact on corporate borrowing costs.
David Knutson, the head of Americas credit research at Schroder Investment Management, warns that “the pullback of a big investor like the tech companies adds to the underlying weakness” in the corporate bond market.
Apple has already confirmed plans to bring home all of its overseas cash.