Amazon’s jumbo debt sale is both unnecessary and irresistible.
The ecommerce group has raised $18.5bn of debt via an eight-part bond sale, with maturities ranging from two to 40 years. Fears of higher inflation that triggered a sell-off in technology stocks on Tuesday were not shared by the investors who crowded into Amazon’s bond offering the night before. The sale drew almost $50bn in orders and helped push the spreads on two- and 20-year tranches to a record low.
For highly rated companies such as Amazon, which is already sitting on $33.8bn in cash and cash equivalents, it makes sense to borrow at these rates. Debt is still cheap. Although the average yield across US investment-grade bonds is 2.15 per cent, up from the record low of 1.78 per cent at the start of the year, according to an index compiled by ICE Data Services, it remains low by historical standards.