Foreign Banks’ Commercial Paper in U.S. Rises to Most Since 2001

The amount of short-term IOUs offered in dollars by foreign financial firms climbed to the most in at least 12 years as overseas banks favor debt issuance in the U.S. after the euro reached an almost two-year high against the dollar last month.

Commercial paper sold by non-U.S. financial institutions rose for a fifth week, increasing about $2.6 billion to $292.6 billion outstanding, the Federal Reserve said today on its website. That’s the highest level since at least January 2001, according to Fed data compiled by Bloomberg.

Overseas financial institutions are accelerating issuance after the gain in the euro made it cheaper for banks in the region to borrow in the U.S. The euro rose more than 4 percent against the dollar in the past six months as the economies of the common-currency nations are forecast in a Bloomberg survey to expand 1 percent next year after shrinking 0.4 percent in 2013.

Overseas banks “who lend in U.S. dollars for their global operations can borrow in low-rate and freely available dollar-denominated CP and eliminate much of this currency risk,” with “no real threat that the dollar will be appreciating against the euro,” Howard Simons, a strategist at Bianco Research LLC in Chicago, wrote in an e-mail.

The total seasonally adjusted amount of U.S. commercial paper fell for a third week, decreasing $12.8 billion to $1.054 trillion outstanding in the period ended yesterday, the Fed said. That’s the lowest level since the period ended Oct. 16 and the longest stretch of declines since the week ended May 8.

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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