Thursday, September 20, 2007

Commercial Paper Market Still Shrinking

From Bloomberg:

The U.S. commercial paper market shrank for a sixth week, extending the biggest slump in at least seven years and signaling Federal Reserve interest rate cuts haven't yet drawn investors back to short-term debt.

Short-term debt maturing in 270 days or less fell $48.1 billion in the week ended yesterday to a seasonally adjusted $1.87 trillion, including a $32.1 billion decline in financial commercial paper. Asset-backed debt dropped $15.6 billion, according to the Fed in Washington.

Commercial paper outstanding has declined $354.5 billion, or almost 16 percent, since the week ended Aug. 8 as investors retreated to the safety of government debt. The slump that began in asset-backed paper spilled to financial companies, where the decline in issuance accelerated. The prospect of a slowing economy, which prompted the Fed to act this week, may have caused firms to reduce sales, said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co. in New York.

It's too early for the rate cuts to have a big impact, but these are very important numbers for the next few weeks.