U.S. commercial paper market recovers a bit compared to last week

by LJ Miehe on March 12, 2009

The size of the U.S. commercial paper market rebounded slightly in the latest week after last week’s huge drop, suggesting some stability in this critical part of the credit market.

These short-term IOU’s – which many companies rely on to fund their daily operations — rose $3.9 billion to $1.484 trillion in the week ended Wednesday, according to Federal Reserve data released on Thursday. It fell $44.2 billion in the prior week.

Despite the increase, the CP outstanding is still far from its peak of $2.2 trillion before the onset of the global financial crisis.


The closely watched unsecured financial CP sector, which reflects the state of the battered banking industry, increased by $8.2 billion, but the asset-backed segment — which had been vital in fueling the U.S. housing boom — fell $4.9 billion to $717.2 billion.


Given the importance of the CP market, the Fed created a financing program late last year to restore credit supply after the sector was nearly frozen during the height on the financial crisis.


The Fed held $241.3 billion of three-month, top-rated CP in its Commercial Paper Funding Facility on March 4.

Source:  Reuters

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