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Part of what allows a company to have insane cashflow is issuing corporate bonds at artificially low prices because the Treasury is manipulated by the Fed.
by onlyrealcuzzo 7y ago
Part of what allows a company to have insane cashflow is issuing corporate bonds at artificially low prices because the Treasury is manipulated by the Fed.
- bequanna 7y agoNot sure I follow. What does the US Treasury have to do with private debt issuances? Did you mean that interest rates are manipulated by the Fed?
- Donald 7y agoNew Fed programs have been stood up in the last month that directly buy corporate debt.
- bequanna 7y agoThat’s a Fed program. Fed != Treasury. What does this have to do with the Treasury?
- abfan1127 7y agoI think he mis-spoke by typing the Treasury.
- AnimalMuppet 7y agoI have the impression that onlyrealcuzzo was referring to something longer term than the last month, though.
- onlyrealcuzzo 7y agoUS Bonds are usually referred to as Treasury bonds, which the Fed buys, to manipulate the yield.
- adventured 7y agoThat doesn't inherently follow at all. It very much depends on the company in question. IBM has a very profitable business and has for the past decade. They're paying around mid 2.x% interest on their debt ($1.3b interest expense last fiscal year). You can double that rate, and IBM can safely handle the cost. They can afford to pay far higher interest rates on their debt while still producing excellent profitability.
- onlyrealcuzzo 7y agoThe interest on their debt would be 6-8% if the US Treasury yield wasn't artificially manipulated by the Fed to ~0%. They'd be paying 3-4x that on interest. That's a decent chunk of their profits / buybacks.