Editor’s Note: This is promising data showing investor’s appetite for corporate debt and signs that companies are preparing for a recovery. Job numbers can out today and surprised the analysts by raising the unemployment rate to 9.8%. Interesting that the market is still down by about 50% to $1.08 trillion from the peak at $2.2 trillion dollars in the summer of 2007. It mentioned that the commercial paper market has been shrinking because these companies have found cheaper sources of funding, where is a cheaper source of funding? Maybe, direct from the Federal Reserve?
Dow Jones, New York - The U.S. commercial paper market increased for the seventh consecutive week this week, according to data released Thursday by the Federal Reserve.
The outstanding commercial paper level rose by $19.7 billion on a seasonally adjusted basis, after an increase of $22.5 billion in the previous week.
Cumulative gains over the past seven weeks total about $158 billion in this market, used by companies to pay employees and landlords and buy inventory.
The recent increases imply that companies may be looking to stock-up, signaling a pick-up in demand and an improvement in the economy.
“The short-term financing needs of companies has been growing,” said Deborah Cunningham, chief investment officer at Federated Investors in Pittsburgh. “It’s more evidence of the fact that the economy is beginning to pick up.”
The commercial paper market had been shrinking during the recession and as companies found cheaper sources of longer-term funding.
Overall, it had shrunk by half in the last two years, to $1.08 trillion in August from a peak of $2.2 trillion in July 2007. This week, total outstandings are at $1.232 trillion.
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