Verizon's bond sale was huge in every way: The offering is nearly triple Apple's sale. The debt will come due at eight different times, from three to 30 years. Demand for the debt was high, with investors placing more than $100 billion in orders for Verizon's offering.
Despite the demand, Verizon did have to pay a hefty price to investors. It priced $11 billion of its 10-year notes at a yield of 5.19 percent, according to a deal document obtained by The Associated Press. That is well above the 4.51 percent yield for similar bonds Verizon had issued previously. By comparison, investors are buying 10-year Apple bonds at a yield of 3.86 percent, a reflection of that company's near-pristine credit and $147 billion in cash.
Verizon likely decided to pay higher interest rates because it needed to wrap up its $130 billion buyout quickly, bond investors said.
"(The buyout) is a big strategic deal for them and they needed the money," said Michael Collins, chief investment officer of Prudential Fixed Income, who bought Verizon bonds as part of Wednesday's sale.
Verizon's massive bond sale comes at a critical time for bond investors. In June, Federal Reserve Chairman Ben Bernanke said the central bank was considering pulling back on its bond-buying program, which has kept interest rates at historic lows in an effort to stimulate the economy.
As a result, the yield of the U.S. 10-year Treasury note, the benchmark for all bonds public and private, is at 2.96 percent, almost double the 1.63 percent yield from early May.
There was talk among investors that the recent rise in interest rates might have pushed Verizon to do its deal with Vodafone, in order to lock in these rates before the Fed starts to phase out its bond buying.
While demand for bonds may have slowed broadly, demand for corporate bonds has remained steady, Prudential's Collins said. Verizon's bond sale is likely to spur more companies to issue debt, particularly if demand for Verizon's bonds stays high. For example, the biggest part of Verizon's offering was $15 billion in 30-year bonds, which had a yield of 6.55 percent, a higher yield than some significantly more risky junk bonds.
"If yields remain high, there's going to be strong demand for corporate bonds from a variety investors — from pension funds to insurance companies, and eventually retail investors," Collins said.