As noted earlier [6], one of the reasons Treasurys are selling off today is because bond investors, who are preparing to consumer yet another batch of $5 billion in Apple bonds to fund repurchases of AAPL stock, have been shorting matched Treasurys for rate lock/interest-rate hedge purposes. That this may have led correlation algos to buy up stocks (because TSYs sell offs have become one of the most bullish stock signals yet, alongside sudden, unexpected surges in crude) is hardly surprising: after all AAPL now accounts [6]for all the earnings growth in Q4.
But another, more relevant, question is why does Apple, which at least check had $178 billion in total cash and investments, need to issue debt to buy back its shares?
The answer is simple: virtually all of AAPL's cash growth in the December 31 quarter took place offshore, where its cash hoard rose from $137 billion to $158 billion (mostly thanks to the previously mentioned surge in Chinese iPhone purchases [7]). How much of Apple's cash is domestic? As the following chart shows, a paltry $20 billion of AAPL's cash, or barely above 10%, is held domestically - one of the lowest levels in the past 4 years - and can be used for such corporate activities as stock buybacks and dividends.
[8]
In other words, companies like Apple are praying to their offshore gods that Obama's initiative to impose a one-time tax on offshore profits and cash holdings, is dead on arrival. Which, luckily for AAPL, GOOG, and every other cashflow positive tech company, it is.
