Apple's (AAPL) (AA-, narrow moat) record-setting $17 billion bond offering was well received by the market, and based on trading in the secondary markets after the deal was launched, it appears to have been priced with exceptionally little new issue concession, especially considering the size of the offering. For example, the firm's 10-year bonds were priced at 75 basis points over Treasuries, but traded only 2-3 basis points tighter in the secondary market.
In our new issue note published before the bond offering was priced, we noted that price talk compared reasonably well with other similar-rated large technology firms. But the new issue tightened 15-20 basis points versus price talk, leaving it not particularly compelling, in our view. For similar credit risk in the technology sector, we prefer Intel's (INTC) (AA, wide moat) 10-year bonds, which are trading about 30 basis points wider than Apple's. We recently added Intel's bonds to our Best Ideas list as its credit spreads have widened out due to investor concerns about depressed demand for PCs. However, based on the firm's massive scale in the semiconductor market, we expect the firm will leverage its ability to produce more-powerful chips at a lower cost than its competitors and develop new products that consume less energy to address the needs of the smartphone and tablet market.