Commercial paper bounced back this week

The latest weekly Federal Reserve report on Commercial Paper showed a sharp bounce-back in the amount of commercial paper outstanding. This was after three consecutive weeks of declines. This will still result in a decline for the month, but less than half as large as a week ago.

Even asset-backed commercial paper showed a healthy gain after four consecutive weeks of decline.

Non-financial commercial paper outstanding is at its highest level since the middle of the Summer.

Commercial paper is a key component of the credit market and is evidence that the credit market is not as "dead" as so many people insist.

One reason for strength in commercial paper is that money market funds thrive on it and due to its very short-term maturity it has a very low interest rate.

Another factor driving the commercial paper market is likely the tremendous turmoil in the auction rate secutities (ARS) market where rich people had previously been stashing their cash. Money market funds and actual commercial paper are now a much more attractive haven for parking of cash.

-- Jack Krupansky