The market for corporate borrowing through short-term IOUs contracted for the third time in four weeks as issuance by domestic financial institutions declined.
The seasonally adjusted amount of U.S. commercial paper dropped $3.1 billion to $996.1 billion outstanding in the week ended yesterday, the Federal Reserve said today on its website. That’s the least since the $990.5 billion in the period ended July 10, an eight-month low.
Commercial paper issued by U.S.-based banks fell $4 billion to $262.4 billion outstanding, the lowest level in two weeks, according to the Fed. Corporations sell commercial paper, typically maturing in 270 days or less, to fund everyday activities such as rent and salaries.
“The decline in commercial paper issuance by financial companies probably reflects more than anything else a continuing effort to reduce dependency upon short-term debt obligations,” Tony Crescenzi, executive vice president at Newport Beach, California-based Pacific Investment Management Co., wrote in an e-mail.
“This is apparent in not only the commercial paper market but the repo market, which has also shrunk since the onset of the financial crisis.”
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