To The Moon

Select Apple 10-year bonds currently yield about 5.20%, while some Meta 10-years yield 5.75%

Apple bonds are offering some juicy yields right now.

Investors are flocking to bonds issued by (almost all) of the Magnificent Seven companies, drawn in by some of the juiciest yields seen on such high-quality names.

Select Magnificent Seven 10-year bonds currently yield anywhere from about 5.20% for Apple Inc. to 5.75% for Meta Platforms Inc. In comparison, the implied dividend yield on Apple’s stock at current prices was 0.54%, while Meta doesn’t pay a dividend.

The remaining five are Amazon.com Inc., Alphabet Inc., Nvidia Corp., Microsoft Corp. and Tesla Inc. Tesla has no outstanding bonds after convertibles issued in the past were converted into stock.

Of that group, only Microsoft and Nvidia pay dividends, but the implied yield on Microsoft’s stock is 0.90% and on Nvidia’s stock is just 0.04%.

The companies’ bonds have fallen in price as their yields have climbed after the Federal Reserve steadily raised its key federal-funds rate to a target range of 5.25%-5.5% in 11 moves started in March of 2022. That’s because of the inverse relationship between bond prices and yields and not because of any credit-quality issue.

For investors, it means the opportunity to add these high-yielding, high-quality names to portfolios at a discount.

As the following charts from data solutions provider BondCliQ Media Services show, there has been steady buying in most of the bonds over the last 10 days, even as their stocks have pulled back a bit.

BONDS OF THE MAGNIFICENT SEVEN – NET CUSTOMER FLOW BY TICKER WITH VOLUME. SOURCE: BONDCLIQ MEDIA SERVICES

Nvidia is the outlier with greater net selling over the period, but spreads between some of its bonds over the yields of equivalent “risk-free” Treasury bonds have tightened over the period. The stock, meanwhile, was down Tuesday as the U.S. said it would expand restrictions on semiconductor sales to China.

SELECT NVIDIA BONDS’ TWO-WEEK SPREAD PERFORMANCE. SOURCE: BONDCLIQ MEDIA SERVICES

Apple has the most outstanding debt in the group.

BONDS OF THE MAGNIFICENT SEVEN — MATURITY STACK BY TICKER. SOURCE: BONDCLIQ MEDIA SERVICES

A selloff in U.S. government debt was accelerating late Tuesday, sending most Treasury yields either further above or toward 5%.

The benchmark 10-year was up 14.4 basis points at 4.853% after September’s stronger-than-expected retail sales report, and is on pace for its largest one-day jump since at least Sept. 21.

Two- and 10-year yields are both heading for their highest closing levels in 16 to 17 years.