The U.S. commercial paper market shrank for a sixth week, extending the biggest slump in at least seven years and signaling Federal Reserve interest rate cuts haven't yet drawn investors back to short-term debt.
Short-term debt maturing in 270 days or less fell $48.1 billion in the week ended yesterday to a seasonally adjusted $1.87 trillion, including a $32.1 billion decline in financial commercial paper. Asset-backed debt dropped $15.6 billion, according to the Fed in Washington.
Commercial paper outstanding has declined $354.5 billion, or almost 16 percent, since the week ended Aug. 8 as investors retreated to the safety of government debt. The slump that began in asset-backed paper spilled to financial companies, where the decline in issuance accelerated. The prospect of a slowing economy, which prompted the Fed to act this week, may have caused firms to reduce sales, said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co. in New York.
It's too early for the rate cuts to have a big impact, but these are very important numbers for the next few weeks.
2 comments:
So far, Bernanke's rate cuts have had an inverse effect on mortgage and re-fi rates: tied as they are to the 10 yr, folks seeking home loans are gonna find lending rates higher this week than last.
I'm just sayin'...
It's a delaying game. The 6 weeks - turns into 12 weeks of waiting for the commercial paper market to rebound.
This reminds me of the Friedman units in the Iraq quagmire...every 6 months we should review. Let's give 'em 6 more months for the surge or whatever we're going to call it through the next extension.
The longer it takes, the longer we expect it to take.
But still we wait for the very important numbers for the next few weeks.
In the meantime, there should be a guessing game if ANY ABCP gets done in this market with the treasuries selling off like today.
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