After peaking in August and then correcting sharply through the remainder of 2007, the commercial paper (CP) market has roughly stabilized and is now drifting in a rage of roughly $1.75 trillion to $1.90 trillion outstanding, and was at $1.82 trillion this week (vs. $1.83 trillion last week last week.) This includes asset-backed commercial paper (ABCP) at $781 billion, non-financial CP at $186 billion, and financial CP at $849 million. In particular, ABCP has been relatively stable for three months after hitting a bottom and then bouncing around the end of the year.
Commercial paper outstanding did decline modestly this week on a seasonally-adjusted basis (-$11 billion), but ex the adjustment CP was up modestly (+18 billion.) Given the dramatic dislocations in the CP market over the past year, I do not have a high level of confidence in the seasonal adjustments. Non-financial CP was actually up slightly (+$2 billion) even with the seasonal adjustment.
Commercial paper is an important source of short-term credit for businesses that have short-term funding needs. A significant fraction of CP is funded by money market funds. Commercial paper is commonly issued in durations of 1 day, 7 days, 15 days, 30 days, 60 days, and 90 days. It is considered fairly low risk, commanding interest rates in the 1.90% to 3.10% range, giving businesses a fairly economical source of short-term funding for short-term business needs.
No comments:
Post a Comment