Warren Buffet/Berkshire Hathaway refinancing $950 Mil to fixed rate long bonds.

[A HERETIC I AM]

If you are a bond investor, this could be of interest to you. Buffet is a pretty smart dude, and for Berkshire to make a move like this at this point in the bond market is significant.

Act on this information as you see fit;

Warren Buffett is wading into the bond market with a new deal, leaving traders wondering whether the Oracle of Omaha is making a prediction about the direction of interest rates.

Berkshire Hathaway Finance Corp. 1 is issuing 30-year fixed-rate bonds to refinance $950 million of floating-rate senior notes that mature at the end of next week. The decision to switch from floating to fixed could be viewed as a bet on where interest rates are headed. Or, at the very least, it could indicate that the company sees the steep decline in long-term yields over the past two months as a market-timing opportunity that’s too good to pass up.

Berkshire, with the third-highest credit rating from both Moody’s Investors Service and S&P Global Ratings, is expected to price the debt on Thursday with a spread of 150 to 155 basis points above benchmark Treasuries. The 30-year U.S. yield fell to 2.91 percent on Thursday, the lowest since January 2018. The recent bond rally equates to millions of dollars of savings a year for Berkshire, if its plan all along was to convert from floating to fixed rate.

https://www.bloomberg.com/opinion/articles/2019-01-03/is-warren-buffett-sending-a-signal-about-the-bond-market?srnd=premium

[wasupaloopa]

1. Their bonds will be in competition with others offering safe risk free returns.

Investors like pension funds who need to be risk adverse may be pulling money out of the stock market and investing in bonds. Returns on even “safe” investments are falling.

This market will increase pressures on employers with retirement plans to increase their contributions. They could be forcing a move from stocks to bonds rather than have an increasing unfunded pension liability. Fixed rate bonds may be the safest place for those investors to be.

Just Guess

[A HERETIC I AM]

2. Berkshire has a pretty impressive portfolio.

As a firm, this strikes me as a way for them to take advantage of historically low yields in long term bonds as a way to, as the article indicates, refinance floating rate debt that is maturing in the coming days.

(On edit to say...DUH! Dopey! That's pretty much what the article says!

Sorry, don't want to sound as if I wrote the damned thing. Someone a shitload smarter than I am, did!)

It will be interesting to see how Moody's and S&P rates this paper. If it has a decent coupon and is rated well, which frankly, it should be, then it is worth taking a serious look at.

http://www.berkshirehathaway.com/subs/sublinks.html

[IronLionZion]

3. Very shrewd move

Long term yields got low because the stock market was low and investors sought safety and stability in bonds. Yields will likely get higher due to various factors so this is a great time to lock in the fixed rates and have some stability for future planning. The cost savings are icing on the cake.

I have Berkshire in some of my mutual funds but I won't be acting on this information. I'm just here for the ride.

[A HERETIC I AM]

4. It's not like it is a cheap stock!

The "A" Share trades for almost $300k/share!
https://finance.yahoo.com/quote/BRK-A?p=BRK-A&.tsrc=fin-srch

Gotta love it when a down day of $17,056 off the share price is only 5.6%!!

The so-called "Baby Berks", or the B shares are considerably more affordable;
$191.66/share
Cheaper than Boeing stock!
https://finance.yahoo.com/quote/BRK-B?p=BRK-B&.tsrc=fin-srch

Again, it will be interesting to see how this debt paper prices out and what coupon it gathers. If it's Triple A and is 130 Bps above the 30 year Treas, they would something to consider, to be sure.