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Big Savings for Verizon, New Low for Microsoft

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November 05, 2012 – Comments (1)

Low as in record low yield on a 5-year corporate bond for Microsoft.

The storm pretty much shut down the new issues in corporate bonds for the first few days of last week.  But, a couple of strong days closing out the week brought $25 billion to market.

In addition to Microsoft's record setting, sub-1% yield on a five-year, Verizon and General Dynamics stand to save millions in interest expenses with refinancings, Aetna borrowed some of the money it needs to buy Coventry and BP didn't really tell anyone much about why it was borrowing money.

No position in any company mentioned.

Fool on!

Russ

1 Comments – Post Your Own

#1) On November 06, 2012 at 5:57 PM, rfaramir (29.34) wrote:

While it is important to track such things as an investor, a bird's eye view will show that this is a source of much malinvestment that will have to be liquidated later.

Practically free loans to do whatever you want are a setup for failure. Sure some of this money will be well-spent, but a good amount will go towards projects that will not pan out, especially as the interest rate environment changes and input costs rise.

And what is the ultimate source of the problem? Fractional reserve banking and fraudulent money-creation by the Federal Reserve. Without them, we would have free market prices on loaned money, better visibility into future costs, and fewer mistakes by entrepreneurs.

This cheap money is Moral Hazard happening before our eyes.

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