Egan-Jones Examines How Strong Credits Can Still Produce Severe Bond Losses

NEW YORK, Aug. 31, 2026 /PRNewswire/ -- Egan-Jones released an analysis examining how a fixed income investor can select a high-quality issuer, complete thorough due diligence, and still absorb a loss of roughly half a position's value.

The commentary centers on Apple's 2.55 percent senior notes due 2060, issued in August 2020 at approximately par. The notes traded near 68 percent of par in December 2023 and have since fallen to about half of par, with a Frankfurt Stock Exchange quote of 50.92 on August 27, 2026. Egan-Jones attributes the decline to the rise in longer-term interest rates, a heavy supply of AI-related debt, and broader investor unease, compounded by a security that was priced to perfection when it was sold.

Credit quality is not the source of that loss. Apple may still be a strong investment grade risk, in the firm's description, with sound management, strong cash flow, and an established product line. The analysis follows a hypothetical portfolio manager who reviews those characteristics, finds the interest offered comparable to other AA+ rated instruments, and commits to a multi-year position. Nothing in that process was careless. The risks that produced the loss sat outside the credit assessment entirely.

Diversification offers limited protection where other holdings share the same characteristics. Egan-Jones observes that a portfolio built instead from assets resembling a typical business development company, with roughly 2.5 percent of loans marked as non-accruing and an average interest rate near 8 percent, would have earned enough interest on the performing holdings to more than offset credit losses. The firm is explicit that this is not an argument that investment grade credit is riskier than speculative grade credit, but that the totality of risks deserves weight alongside the quality of the issuer.

Egan-Jones concludes that a clear understanding of all the risks attaching to an investment is usually the best path forward, and that some of the most damaging risks are not readily apparent. For investors, the commentary illustrates how far a security's outcome can diverge from the issuer's standing, and why the totality of risks, rather than the borrower's quality alone, should govern the decision.

About Egan-Jones Ratings
Egan-Jones, an NRSRO founded in 1995, offers timely and accurate credit ratings and proxy services.

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SOURCE Egan-Jones Ratings Co.