Berkshire Hathaway Inc.'s $1 billion note sale shows that while Chief Executive Officer Warren Buffett may pity investors who've stuck with bonds as yields fall to record lows, he'll sell them as much debt as they want.
The company's Berkshire Hathaway Finance Corp. sold five-and 30-year securities offering the company's lowest coupons for those maturities ever. Berkshire, whose holdings span insurance, railroads, newspapers and manufacturing, has reduced its bond investments to $28.6 billion from $34.1 billion in the last three years, regulatory filings show.
Berkshire isn't buying corporate bonds, Buffett, 82, said during a May 4 interview with Bloomberg Television's Betty Liu after the company's annual meeting in Omaha, Nebraska. With the average yield on U.S. corporate debt having fallen to a record low 3.35 percent this month from more than 11 percent in 2008, the second-richest American said at the meeting he has empathy for savers who depend on bond interest.
"Buffett's views on current interest rates are pretty clear," said Richard Cook, co-founder of Cook & Bynum Capital Management LLC in Birmingham, Alabama, which oversees about $270 million including Berkshire shares. "Berkshire issuing debt is effectively an efficient way to short the bond market."
David Fuller's view It is a smart move. Warren Buffett would not be issuing long-term debt if he was not convinced that US interest rates have bottomed and will start to rise, probably over the next year or two.Back to top