Top US tech companies sold bonds as yields plunged

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Tech companies – Apple, Amazon, Alphabet, Facebook & Microsoft – sold $23 billion of government and corporate bonds in Q1 2020.

by Manpreet Singh

Published: 14 July 2020

The top five companies in the S&P 500 index – Apple, Microsoft, Amazon, Alphabet and Facebook- by market capitalization reduced their investments by $28.8 billion in Q1 2020 according to SEC filings, of which 80% came from the sale of corporate bonds and government bonds.

The total investment holdings of the companies stood at $493 billion which is the lowest since 2017. By comparison, their combined market cap currently stands at an all-time high of $6.6 trillion – a quarter of the S&P 500 total capitalisation – as the pandemic helps cement their dominance.

The selling of securities came at the time when US treasury yields hit all-time lows as the Federal Reserve ramped up quantitative easing in the face of Covid-19. At the start of the year, the 10-year treasury rates were 1.76% which fell to 0.67% in May 2020. The 3 month and 2 maturity rates at the end of May 2020 were 0.13% and 0.17%.

Last month, EuroFinance reported that the top 30 companies on the S&P 500 index have increased their cash holdings by $81 billion from Q4 2019 to Q1 2020. Of which, Microsoft, Alphabet, Facebook and Apple saw a rise in cash holdings by 32%, 24%, 6% and 1% while Amazon saw a dip of 25% in cash holdings.

Cash & cash equivalents & marketable securities holdings at tech companies graph

While the cash holdings have gone up, government bonds, corporate bonds and mortgage-backed securities saw a dip of $23.7 billion in the same period. Just the sale of government bonds was $20.1 billion of which Apple sold 64% or $12.9 billion of them followed by Amazon with $4 billion and Alphabet with $3.9 billion in Q1 2020. The total bond holdings which include government bonds and corporate bonds at the tech companies have fallen to the lowest levels since 2016 to $395 billion.

Securities holdings at tech companies graph
Last year in November, EuroFinance also reported that the tech companies are increasing their holdings in money market funds and deposits by 67% and 97% in 2019 against 2018. In Q1 2020, these came down by 4% and 18% respectively.

The largest decrease in the sale of government securities was seen in Apple. At the end of 2019, it held $57 billion which came down to $44.1 billion at the end of Q1 2020. It sold nearly 96% and 63% of its US agency securities which were in the form of cash & cash equivalents and current marketable securities respectively in Q1 2020. In the same period, the company sold 73% and 39% of US treasury securities which were in the form of cash & cash equivalents and current marketable securities in Q1 2020.

Treasury maturity rate graph

Since 2018, tech companies have continued to sell corporate bonds and government bonds. In the last 2 years, they have collectively sold $51billion and $37 billion of corporate bonds and government bonds. The single largest selling of corporate bonds came in 2018 while for government bonds, it was in Q1 2020.

Change in securities holdings from the previous period graph

The largest dip in investment holdings in Q1 2020 came from Amazon with 10% but in absolute terms, it was Apple with $14 billion. In contrast, Microsoft was the only tech company which increased its government bond holdings by 0.84% in Q1 2020.