Oracle's longest notes pay 8.65%, and Apple's memory bill keeps rising

Three moves

Credit. Oracle raised all $20 billion in one day. It sold 86.2 million shares at $116, about 11% under Friday’s $130.67 close, and $10 billion of notes in five pieces, from 7.000% notes due 2029 to 8.650% notes due 2046, priced as much as 3.35 percentage points over Treasuries (SEC). Expected ratings are BBB- at S&P, one notch above junk, and Baa2 with a negative outlook at Moody’s. The stock fell 8.8% on Monday (CNBC). To be fair, Baird’s Rob Oliver said, “This seems to be exactly what they previewed.” Our view: 8.65% for 20 years is the going rate for an AI builder that doesn’t expect positive free cash flow until 2028.

Corporate. Apple’s September quarter revenue rose 12% to $114.5 billion, and gross margin was 47.9%, about a point of it from tariff refunds (CNBC). For the December quarter it guided margin to 45% to 46%, under the 46.3% analysts expected, mostly on memory. CEO John Ternus called memory pricing “unprecedented,” CFO Kevan Parekh expects those costs to keep rising into next year, and purchasing commitments grew $33 billion in the quarter (CNA). Shares fell as much as 4% after hours. In fairness, Apple guided sales up 7% to 10%, above the 6.1% estimate. We think the AI build-out is now billing the one megacap that mostly sat it out.

Oil. US crude fell 7.4% on Monday to $96.46 a barrel, its biggest one-day loss since July 27, and Brent lost 7.6% to $104.77 as the US and Iran signaled openness to talks (CNBC). As of 4:55 a.m. ET, CNBC had Brent up 1.75% at $106.60 on a report of a US strike on Qeshm Island (CNBC). The other side: one day of talk moves no tankers. Our view: crude now swings on headlines in both directions, and regular gasoline at $4.15 only keeps falling if Monday’s drop holds.

What could move prices

Treasury expects to borrow $618 billion from private investors in October through December and $800 billion in January through March (Treasury). Leave out a bigger starting cash pile and this quarter’s need is $24 billion above the August estimate. On Wednesday at 8:30 a.m. ET, Treasury says how that borrowing splits between bills and longer bonds. The 10-year yield fell 9 basis points in a week to 4.91%. Bigger long-bond auctions would push that yield back up.

The calendar

The September job openings report lands at 10:00 a.m. ET today, the last labor read before Friday (BLS). Treasury’s refunding details follow Wednesday at 8:30 a.m. ET. Thursday brings third-quarter productivity and labor costs at 8:30 a.m. ET, then the October payrolls report closes the week Friday.

Who pays: the card borrower

More households are putting higher prices on credit cards, banks say. In the Fed’s October survey of senior loan officers, released Monday, 41.2% of banks said customers’ need to cover price changes for goods and services strengthened card demand over the past year, against 5.9% who said it weakened (Fed). The door is narrowing at the bottom. Banks tightened credit limits, 10.8% are less likely to approve subprime applicants than a year ago against 5.4% more likely, and 53.6% don’t issue cards to subprime borrowers at all. Prime and super-prime applicants found approvals easier.

Net net: the households that most need a card to cover rising prices are the ones banks are turning away.

Footnotes

• Australia: The Reserve Bank of Australia raised its cash rate 25 basis points to 4.85%, citing fuel prices and AI-related investment pushing up prices for technology goods (RBA).
• Diesel: AAA’s national diesel average is $6.29 a gallon, down from $6.35 a week ago and below the $6.53 record set Sept. 22 (AAA).