Amazon Turns to the Bond Market

Ben Bernanke’s strategy of lowering interest rates to the floor and announcing to the world that he intends to keep them there until to 2015 has radically altered the investing landscape. Investors have plowed an astounding $1.33 trillion into high-yield and investment-grade bonds this year.

Not surprisingly, yields for bonds have dropped, and they’ve dropped for both the high-grade stuff and for the low-grade junk. Only with some concerns about the fiscal cliff have junk bonds recently pulled back. Besides that, it’s been a great year for junk bonds. ($AMZN) went to the bond market for the first time since 1999. The company doesn’t have major plans for the money, just general business operations like buying their HQ building. Moody’s rated their bonds as Baa1 which is three levels above speculative grade.

Looking at the yield Amazon got, it was a shrewd move. The company issued $750 million of three-year notes which yield just 38 basis points more than a similar Treasury. Amazon also issued $1 billion in five-year notes (63 basis points above similar Treasuries) and another $1.25 billion in 10-year bonds (93 basis points).

Posted by on November 27th, 2012 at 11:29 am

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.