American industrial giants Apple and General Motors were forced to offer higher returns on their new bonds on Monday, a clear indication of growing investor concerns regarding the impact of tariffs imposed by President Donald Trump on companies with global supply chains.
This move highlights the pressures facing large companies amidst rising trade protectionism and its potential effects on their future profits.
Higher Returns to Attract Investors
To convince investors to buy their new debts, both Apple and General Motors offered returns that were relatively high compared to their existing bonds.
Apple paid a new issue premium of 5 basis points, while General Motors’ premium reached 18 basis points.
These premiums are considered high compared to the prevailing average this year, reflecting investors' demands for more compensation for the increasing risks.
Weak Demand Reflected in Low Coverage
In addition to higher returns, other indicators showed relatively weak demand for the bonds of the two companies. For instance, the coverage ratio for Apple’s 3-year bonds was 1.9 times, while it was 2.6 times for the 10-year bonds, whereas the average for issuers this year stands at 3.6 times.
This weakness in coverage indicates the caution of investors and their reluctance to engage with the debts of these companies under the current economic and trade conditions.
