Major tech companies such as Apple and Microsoft are reducing their appetite for short-term corporate debt securities.
Following the Republican-led tax overhaul this year, which incentivized U.S. corporations to bring home their overseas cash stockpile, tech giants are parking less money in corporate debt holdings compared to their earlier binge on such securities. Apple along with 20 other cash-rich companies including Microsoft Corp. and Oracle Corp. are now selling in $50 billion clips, compared to the previous per-quarter purchase of $25 billion of short-term corporate debt (according to data tracked by Bank of America Corp. strategists, as reported by Bloomberg). The selling, in turn, is creating upward pressure on short-term bond yields, more so amidst the Federal Reserve’s rate hiking cycle. According to Bloomberg Barclays index data, yields on corporate bonds with maturities between one and three years have jumped 0.85 percentage point this year to 3.21 percent, close to the highest in almost eight years.