The U.S. commercial paper outstanding fell in the latest week, resuming its recent decline, suggesting persistent tension in short-term credit markets, Federal Reserve data released on Thursday showed.
The U.S. government hopes to break this stubborn credit logjam as it kicked off its Term Asset-Backed Securities Loan Facility (TALF) in a bid to stimulate lending to cash-strapped consumers and small business.
This latest rescue program comes a day after the Fed pledged to buy another $1.15 trillion in debt securities, including $300 billion in Treasuries, with the goal of lowering private-sector interest rates and improving overall credit conditions.
Total commercial paper outstanding fell $7.5 billion to $1.477 trillion in the week ended March 18. It is far below its peak of $2.2 trillion prior to the onset of the credit crunch that led to the global economic downturn.
Commercial paper is a crucial source of short-term funds for many companies, who spend the proceeds on payrolls and inventories.
The week’s shrinkage in the CP market was led by a $17.3 billion decline in asset-backed commercial paper outstanding, which ended at $699.8 billion on Wednesday.
However, the closely-watched unsecured financial CP sector, which reflects the state of the battered banking industry, grew for a second week in a row. This type of commercial paper outstanding increased by $10.8 billion to $587.3 billion.
Source: Reuters
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