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CP market surges after first-half collapse Print E-mail
Friday, 09 October 2009

By Matthew Quinn

The U.S. commercial paper market had its biggest weekly increase in nearly a year, as both financial and non-financial companies increased their issuance.

Commercial paper outstanding reached $1.3 trillion for the week ended Oct. 7, after rising $68 billion from the prior week, according to Federal Reserve data. The market has expanded for eight straight weeks and is up nearly 21 percent in that time.

"Commercial paper would have no reason to increase if companies weren't seeing a need to invest," Dan Greenhaus, chief economic strategist with Miller Tabak + Co. in New York, told Reuters.

Non-financial CP increased $28 billion for the week, bringing it to its highest level since mid-June. Financial commercial paper outstanding rose for the third straight week, increasing by $31 billion, to $633 billion. That's the highest since April.

The trend is certainly moving the right way, but the market is still down nearly 23 percent since the beginning of the year. At one point, starting in April, CP outstanding contracted for 16 straight weeks, falling from $1.53 trillion to $1.07 trillion by the end of July. The market peaked in August 2007, when it hit $2.2 trillion.

It's unlikely that the CP market will get anywhere near its 2007 peaks, which was largely driven by asset-backed commercial paper issued by special purpose vehicles. At the market's height, there was $1.2 trillion in ABCP outstanding. Today, outstanding issuance sits at $531 billion.

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