Cashing in on the Fed’s zero percent interest rates while the going is still good, Microsoft is issuing $10.75 billion in bonds—an increase from an originally planned $7 billion offering. With the world’s major central banks holding or promising to buy an inordinate amount of the world’s safe debt, the supply of high-grade bonds is falling short of demand. Microsoft is one of the few remaining triple-A-rated borrowers around, so investors have jumped all over the offering. Reuters has reported investor orders of $37 billion.
The offering is broken into seven tranches ranging from short-dated notes to 40-year bonds. Forty years is a long-time to lend any company money, let alone a technology company, even if it is AAA rated.
Forty years ago, the PC was in its infancy. Microsoft Windows didn’t exist, nor did the internet, the smart phone, or cloud software. Ten years ago the best in the business hadn’t a clue that Apple would become the hit is has. What do you think the chances are that they’ll get the technology landscape of 2055 right?
But why let reason stand in your way? So with long-term interest rates at historic lows and the competitive threat to Microsoft at multi-decade highs, some investors have decided it is a good idea to lend money to Microsoft for 40 years.
Jeremy Jones, CFA
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