The market for corporate borrowing through short-term IOUs contracted to the least since November led by a decline in nonfinancial issuance.
The seasonally adjusted amount of U.S. commercial paper fell $19.5 billion to $1.002 trillion outstanding in the week ended yesterday, the Federal Reserve said today on its website. That’s the lowest level since the market touched $997.9 billion in the period ended Nov. 21.
Companies are issuing more corporate bonds to lock in longer-term, stable funding with yields at almost record lows, in preference to shorter-term financing via commercial paper, which has to be rolled over more often.
“Non-financial names have found alternative funding avenues,” Sean Simko, a money manager at SEI Investments Co. in Oaks, Pennsylvania, whose team manages about $3 billion of commercial paper, wrote in an e-mail. “They have taken advantage of longer term funding.”
IOUs issued by non-financial companies declined for a sixth week, dropping $14.8 billion to $184.5 billion, the lowest level since $184.2 billion for the period ended Oct. 31.
Corporations sell commercial paper, typically maturing in 270 days or less, to fund everyday activities such as rent and salaries.
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