The market for corporate borrowing through short-term IOUs expanded for the fifth time in six weeks, led by an increase in issuance from nonfinancial firms.
The seasonally adjusted amount of U.S. commercial paper rose $3.4 billion to $1.038 trillion outstanding in the week ended yesterday, the Federal Reserve said today on its website. That’s the highest level since the market touched $1.048 trillion in the week ended May 29.
“The small rise in non-financial CP outstanding is attributable to the continued rise in short-term corporate bond rates,” Howard Simons, strategist at Bianco Research LLC in Chicago, wrote in an e-mail. “Firms that had been terming out their debt are moving into the CP market and assuming the rollover risk.”
U.S. company bond yields jumped 9 basis points yesterday to 3.92 percent, the highest level since August and up from a record low of 3.35 percent on May 2, according to the Bank of America Merrill Lynch U.S. Corporate & High Yield Index.
The climb in yields accelerated after Federal Reserve Chairman Ben S. Bernanke said yesterday the U.S. central bank will probably taper its $85 billion in monthly bond buying later in 2013 and halt purchases around mid-2014 as long as the world’s largest economy performs in line with Fed projections. Bernanke spoke with reporters in Washington after a two-day meeting of the Federal Open Market Committee.
IOUs issued by nonfinancial companies rose for an eighth week, the longest stretch of increases since the period ended April 6, 2011, rising $2.3 billion to $222.4 billion, the Fed said.
Corporations sell commercial paper, typically maturing in 270 days or less, to fund everyday activities such as rent and salaries.
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