No credit default swap market yet for new Apple mega-bond

“A market has yet to materialize for credit default swaps offering protection on Apple Inc’s record US$17 billion bond issue, despite the enormous size of the deal,” Melissa Mott reports for International Financing Review.

“While quotes are available and prices have been published by data vendors since May 1, activity has been negligible, with only a handful of investors attempting to make a market in the five-year maturity,” Mott reports. “‘I would think CDS will start trading at some point, but this is one of these situations where it’s such a cash-rich institution that having CDS on it is less valuable,’ said William Larkin, portfolio manager at Cabot Money Management. ‘CDS is something you buy if you think the credit will deteriorate. Apple really doesn’t need CDS.'”

Mott reports, “Others said the absence of volatility in secondary market trade has reduced hedging demand and made the bonds a less aggressive play for fast money. Credit default swaps offer protection against a potential default and are also used to speculate on creditworthiness. ‘From the sell-side perspective, there is not a lot of interest to hedge out risk exposure on this type of name, especially since it’s easier and cheaper to short with Treasuries,’ said a market source.”

Read more in the full article here.

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    1. CDS is one of derivative financial instruments that ruined economy back in 2007-2008.

      Banks which sold CDS were supposed to cover risks in case if certain bonds will not be repaid by initial issuer.

      Banks bribed government and legislators to NEVER have any limits on how many bonds they can “cover” with this instruments.

      So when bad debts/bonds matured and could not be repaid by initial issuers, banks who sold CDS could not cover those losses to their clients to whom they sold CDS — because they sold so many CDS contracts.

      Since there is no regulation whatsoever even to this day, 2007-2008 crisis can get repeated easily. Banks continue to claim they will “insure” payments instead of initial issuer if it defaults, but the quantity of such liabilities/CDS contract bank sell is crazy.

      Since there is so little risk that Apple will default their $17 billion bond, it is not smart to buy CDS for this bond — you will lose money, which are percentages you will pay to banks to sold CDS for their promise to pay the debt to you if original insurer (Apple) will default.

      1. It’s no wonder you posted this rant anonymously. Libel – that is, accusing persons of giving and receiving bribes with no proof – could cost you a lot in court. But since you really have NO PROOF of what you claim, you’re just a troll.

        1. You might want to research concept of legalized bribe: government officials either come from the banks or go from their positions in the government to banks, or they go to be lobbyist, or they get political endorsements and contributions to their PACs.

        2. To call that a rant shows complete lack of understanding of the subject matter. The post concisely and clearly explained wht CDS is, what it does, what are the risks and what was its role in the economic calamity of recent years. It also explained what little value CDS would have for those buying Apple bonds.

          Bribes are extremely common in the American political system. They are officially called “campaign contributions”, but they essentially have the same consequences.

  1. Ok, so, what the real world is saying to Wall Street and the manipulative analysts is that Apple is the world’s most stable company with a future that no one has any doubts about (except for the doubts we hear about daily from Wall Street and the manipulative analysts).

    1. So, could the same be said of Samsung or Dell or Microsoft or Yet, they trade at a much higher P/E than AAPL?

      You have to love the selling just ONE DAY prior to the Monday night dividend payment of $12.20 a share. Really, someone would sell now? Why?

    2. You make a good point. Where are all these “Apple is doomed” writers and analyst?
      Shouldn’t they be buying up all the credit default swaps’ on Apple?

  2. Apple bonds. A sad day in Apple history.

    I believe that Apple obtained a higher credit raiting than the US government which is kinda funny but not as high as my government of sweden wich still has a AAA raiting higher than both the UK and the US. Not man counties l left in the world with an AAA raiting.

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