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U.S. Commercial Paper Declines to Least in Four Months, Fed Says

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April 4 (Bloomberg) -- The market for corporate borrowing through short-term IOUs contracted to the least since November led by a decline in nonfinancial issuance.

The seasonally adjusted amount of U.S. commercial paper fell $19.5 billion to $1.002 trillion outstanding in the week ended yesterday, the Federal Reserve said today on its website. That’s the lowest level since the market touched $997.9 billion in the period ended Nov. 21.

Companies are issuing more corporate bonds to lock in longer-term, stable funding with yields at almost record lows, in preference to shorter-term financing via commercial paper, which has to be rolled over more often.

“Non-financial names have found alternative funding avenues,” Sean Simko, a money manager at SEI Investments Co. in Oaks, Pennsylvania, whose team manages about $3 billion of commercial paper, wrote in an e-mail. “They have taken advantage of longer term funding.”

IOUs issued by non-financial companies declined for a sixth week, dropping $14.8 billion to $184.5 billion, the lowest level since $184.2 billion for the period ended Oct. 31.

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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