One of the big surprises during Apple's (NASDAQ:AAPL) blowout earnings release last night was the fact that Apple stepped up its share repurchase activity in a big way. But investors already know that the company has been utilizing debt to help fund those share repurchases, as all the capital returns have been putting a major dent in Apple's domestic cash position.

At the end of June, Apple had under $27 billion in domestic cash. Apple didn't mention its domestic cash balance last night, so investors will have to wait until the 10-K is filed for a detailed breakdown. So how did Apple just repurchase $17 billion without conducting another bond offering?

Answer: commercial paper
The June quarter marked the first time that Apple entered the commercial paper market, issuing $2 billion short-term obligations. During the September quarter, Apple did it again, issuing another $4 billion in short-term obligations. That covers nearly 25% of this quarter's share repurchase activity.

Apple now has over $6.3 billion in commercial paper, which is a form of debt. These issuances have helped Apple bolster its domestic cash position, which in turn helps fund its capital return program.

A quick refresher
Just to jog your memory on commercial paper, it's an unsecured, short-term money market instrument that matures in 270 days or less. Companies typically issue commercial paper as a way to fund short-term operational expenses, such as accounts receivable or inventories, among other uses.

Commercial paper is typically issued at a discount, and then redeemed at face value (just like zero coupon bonds). The difference is effectively the interest cost that the company pays. Commercial paper can provide short-term financing for up to nine months, in which case commercial paper doesn't need to be registered with the SEC. That makes it more accessible and cost-effective.

Debt evolved
Now that Apple has entered the commercial paper market, it's likely there to stay. Companies frequently roll over commercial paper upon maturity with new issues. There's not much of a secondary market for commercial paper, unlike the bond market.

As Apple's capital structure evolves, so too must its debt strategy. The addition of commercial paper to the mix represents this evolution, as any well-rounded corporate debt strategy should include short-term and long-term maturities in order to better mitigate interest rate risk.

For Apple, it's not like it needs help with financing short-term operational expenses, but at the same time keep in mind that it's all just a big pile of money. It may technically use the commercial paper proceeds to fund short-term obligations (in accordance with SEC regulations), while using the rest of its domestic cash on its capital return program.

The net result is the same: Apple gets to repurchase more stock.