Why should companies want to buy back 'relatively expensive equity' selling cheaper debt? I don't doubt they will continue doing this since companies buy high and sell low (or at least don't buy a lot when prices are low- cf. 2008 and 2009.

Eoin Treacy's view

Thank you for this question which has three possible answers. The first for US companies focuses on tax since buybacks are not considered distributions while dividends are taxed.

The second is based on weighted average cost of capital. For example, issuing equity costs Apple 9.8% while debt costs it 1.9% to issue. If you have wad of cash and want to give some to shareholders and improve the capital structure is makes sense from an academic perspective to substitute equity for debt or to simply use cash to reduce the outstanding equity.

For executives whose compensation is judged on an earnings per share basis this policy also has obvious merits.  

These points represent the status quo rather than what a rational investor might consider best practice. However these policies tend to persist for as long as debt is cheap to issue. Rising rates tend to upset this system. At the lows it is generally difficult to issue debt so companies don’t buy back shares. Since buybacks are a major component of stock market demand they are one of the primary conduits for how easy monetary policy affects shares.