Nonfinancial Commercial Paper Rises to Most Since 2001, Fed Says

The market for short-term IOUs by nonfinancial companies climbed to the highest mark in 12 years.

The seasonally adjusted amount of commercial paper issued by the firms climbed $13 billion to $242.5 billion outstanding in the week ended yesterday, the highest level since June 2001, the Federal Reserve said today on its website.

The central bank’s unprecedented economic stimulus measures pushed borrowing costs to record lows for debt issuers in May, spurring record offerings of dollar-denominated company bonds that have reached an all-time monthly high in September.

“Short-term debt markets are functioning as normally as can be expected given the ongoing distortions of monetary policy,” Howard Simons, strategist at Bianco Research LLC in Chicago, wrote in an e-mail.

Nonfinancial commercial paper climbed to $223.8 billion in January 2009, a more than seven-year high, before plunging to $101.2 billion that December, according to Fed data compiled by Bloomberg.

Total U.S. commercial paper climbed $17.2 billion to $1.064 trillion outstanding in the period ended yesterday, the third straight increase, according to the Fed. That’s the highest level since the market touched $1.085 trillion for the period ended Feb. 13.

Corporations sell commercial paper, typically maturing in 270 days or less, to fund everyday activities such as rent and salaries.

To contact the reporter on this story: John Parry in New York at jparry5@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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