October Begins with Growth in US Commercial Paper

The amount of US seasonally adjusted commercial paper grew by US$11bn to US$1.066 trillion in the week ended 9 October, according to the Federal Reserve. The figure was the highest in eight months when the market touched US$1.085 trillion in the week to 13 February, according to Bloomberg data.

The news agency reports that the market benefited from investors turning to alternatives to short-term US Treasury bills, thanks to the political gridlock in Washington and the increasing possibility that the US will shortly breach its debt ceiling.

According to Bloomberg, one-month Treasury bill rates exceeded those of 30-day commercial paper by the most since at least 2001 as the partial government shutdown since 1 October showed little sign of being resolved. The inversion in rates signals investors are demanding a higher return to compensate the perceived risk of holding short-dated government debt than for highly rated commercial paper from companies.

Non-seasonally adjusted commercial paper outstanding – which some analysts consider a more reliable reading than the seasonally adjusted one as it has been distorted by the financial crisis – fell by US$2.2bn over the same period to US$1.017 trillion. US non-seasonally adjusted foreign financial commercial paper outstanding fell US$8.3bn to US$235.1bn.