The market for corporate borrowing through commercial paper contracted for the first time in four weeks as investors shunned the short-term IOUs of domestic financial institutions.
The seasonally adjusted amount of U.S. commercial paper fell $9.9 billion to $1.022 trillion outstanding in the week ended yesterday, the Federal Reserve said today on its website. It’s the first decline since the market shrank $20.8 billion in the period ended Aug. 8 and the lowest level since $1.02 trillion outstanding on Aug. 15.
Demand from money-market funds, among the biggest investors in the market, has declined for short-term obligations from banks on concern that Europe’s sovereign debt turmoil will taint balance sheets globally. European Central Bank President Mario Draghi said today policy makers agreed to an unlimited bond-purchase program to regain control of interest rates in the euro area and fight speculation of a currency breakup.
Commercial paper issued by U.S.-based banks dropped $6.5 billion to $292.3 billion, the biggest decline since a $14.8 billion fall in the period ended Aug. 8, according to the Fed. The amount sold by overseas financial institutions increased $3.1 billion to $236.7 billion, the highest level since July 2011.
Corporations sell commercial paper, typically maturing in 270 days or less, to fund everyday activities such as rent and salaries.