Commercial paper bounces back for a second consecutive week

For a second consecutive 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.

Financial commercial paper is coming back strongly.

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. And, its short-term maturity guarantees liquidity.

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