Commercial paper falls lately

The market for short-term corporate debt known as commercial paper fell in the latest week.

Photo: Commercial paper falls lately

The total amount of commercial paper outstanding fell $3.6 billion (2.46 billion EUR) in the week ended Wednesday, following a decrease of $15.8 billion (10.79 billion EUR) the previous week, the Federal Reserve reported on its Web site Thursday.

The riskiest part of the market, commercial paper backed by collateral that includes poor-quality mortgages, contracted by just $600 million (410 million EUR) last week, the smallest drop in 14 straight weeks of declines begun in mid-August, Fed statistics showed.

The latest results continue "a trend toward stabilization following a drubbing in August and early September," said Tony Crescenzi, senior fixed-income analyst at Miller Tabak.

"The improvement in the asset-backed sector in the latest week will be a relief to those who focused on last week's data, which saw the asset-backed sector contract by $29.5 billion (20.15 billion EUR), its largest contraction in two months," he said.

The commercial paper market, which seldom attracts much attention, was hit hard in August by a dramatic increase in risk aversion as investors sought cover from the shakeout in the below prime lending and corporate credit markets.

In good times, commercial paper provides an easy way for companies to get short-term operating capital while avoiding formalities such as registering bond sales with the government. These assets tend to feature lower interest rates than longer-term bonds and often require little beyond the good name of the issuer to bring about a sale.