Why Is Apple Raising $1 Billion Through A Bond Raise In Taiwan?

Apple Inc. (NASDAQ: AAPL) is looking to raise $1 billion through the issuance of bonds in Taiwan.

Reuters, citing "sources familiar with the matter" and analysts it spoke with, noted that Apple's bond offering in Taiwan, its first ever in the country, is likely to help the company secure "solid partnerships" with its suppliers in the country, including Foxconn, Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE: TSM) and Largan Precision Co.

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The U.S. dollar denominated bonds will have a tenor of 30 years and be calleable after the second year. Reuters sources suggested the initial yields on the bond will be around 4.2 percent to 4.3 percent.

Reuters also suggested that liquidity in the Taiwanese bond market is "flush" as long-term buyers of debt, such as life insurance firms, seek out creditworthy names that offer attractive yields. In addition, bond holders in Taiwan typically hold the debt through maturity, which allows companies like Apple to lock in cheap pricing.

"Taiwan insurance companies don't have enough good (quality) fixed-income investment targets," an official at a local securities house who declining to be identified anonymously told Reuters. "But their funds continue to grow because in this low rate macro-environment. Consumers prefer to buy financial products offered by insurance companies rather than park money in a bank deposit."