The market for corporate borrowing through commercial paper contracted for a second week, led by a decline in issuance by U.S. financial institutions.
The seasonally adjusted amount of U.S. commercial paper dropped $5.7 billion to $1.01 trillion outstanding in the week ended yesterday, the Federal Reserve said today on its website. That’s the lowest level since the market touched $1.002 trillion for the period ended April 3.
Demand from money-market funds, among the biggest buyers of commercial paper, has declined this year, while companies have been able to issue longer-term debt in the corporate-bond market at record-low borrowing costs. Total assets in the funds have decreased to $2.595 trillion in the week ended April 17 from $2.716 trillion for the period ended Jan. 9, according to the Investment Company Institute.
“The continued shrinkage in money-market mutual fund assets is lowering the demand for financial CP,” Howard Simons, strategist at Bianco Research LLC in Chicago, wrote in an e- mail.
Commercial paper issued by U.S.-based banks fell $6.6 billion to $291.4 billion outstanding, the lowest level since the period ended Nov. 21, according to the Fed. Commercial paper sold by non-U.S. financial institutions rose for the sixth time in seven weeks, increasing $6 billion to $238.4 billion outstanding, the highest level since the period ended Feb. 6.
Corporations sell commercial paper, typically maturing in 270 days or less, to fund everyday activities such as rent and salaries.
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