Bloomberg News

Company IOUs Fall for 14th Week in Longest Streak Since 2000

October 20, 2011

Oct. 20 (Bloomberg) -- The U.S. commercial paper market fell for a 14th week, the longest streak in at least a decade, as investors concerned that Europe’s sovereign crisis is deepening cut holdings of financial issuers’ securities.

The seasonally adjusted amount of short-term company IOUs fell by $17 billion to $949.3 billion on a seasonally adjusted basis in the week ended Oct. 19, the Federal Reserve said today on its website. That’s the lowest level since reaching $916.8 billion on Jan. 19, according to Fed data compiled by Bloomberg.

Money market funds, among the biggest buyers, are reluctant to purchase financial commercial paper as European leaders struggle to contain a fiscal crisis that threatens to infect bank balance sheets, said Raymond Stone, an economist at Stone & McCarthy Research Associates. U.S.-based financial firms led the decline in short-term borrowing, falling $19.5 billion to $278.7 billion, Fed data show.

“In a world where credit is strained we are seeing loans at banks generally increase and financial commercial paper declining,” Stone, who is based in Princeton, New Jersey, said in a telephone interview. “It may be the issuers of financial commercial paper are knocking at the doors of banks and taking out loans instead,” a trend which is suggested by increases in U.S. commercial and industrial loans, he said.

Commercial paper sold by non-U.S. banks rose $2.0 billion on a seasonally adjusted basis, snapping six weeks of declines.

Corporations sell commercial paper to fund everyday activities such as paying payroll and rent. The whole market’s weekly decline marks the longest stretch since at least December 2000, according to the Fed data

--Editors: Alan Goldstein, Mitchell Martin

NI CP NI BON NI COR NI BNK NI USCORPFIN NI CORPFIN NI US NI FED NI FIN

#<885350.4668551.2.1.95.14779.25># -0- Oct/20/2011 15:16 GMT

To contact the reporter on this story: John Parry in New York at Jparry5@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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