Commercial Paper Contracting at Nearly Fastest Rate on Record

The Commercial Paper (CP) market is essentially a private debt market used by corporations as a cheaper means of funding typical recurring operations than drawing on a line of bank credit.

Commercial paper, as financial instrument, is by no means a recent innovation and, in fact, you can read about how the CP market was affected by the many historic financial shocks experienced by the U.S. (read Panic on Wall Street: A History of America’s Financial Disasters).

Although the Federal Reserve was able to artificially bring CP rates down significantly since the shocking 615 basis point spread blowout (A2/P2 spread) of late 2008, they have apparently not been successful in preventing an overall contraction in the CP market.

The Federal Reserve calculates and publishes the total amount of CP outstanding every week and as of the latest published period, commercial paper outstanding is contracting at nearly the fastest rate on record, registering a whopping 17.81% decline year-over-year.

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Comments

[John Ryskamp:]

The main importance of this figure is to direct attention to the supply chain. That is what has begun to collapse, and this will be the coup de grace of the economy. I think this is the reason the Administration is preparing a $2.4 trillion stimulus for February 2010. The society is collapsing.

Nov 05 03:57 PM

[aussiereader4:]

The other possibilty is that it is being snapped up by investors. Without knowing the commercial paper figure and which way it is heading, this number is meaningless.


On Nov 05 03:57 PM John Ryskamp wrote:

> The main importance of this figure is to direct attention to the
> supply chain. That is what has begun to collapse, and this will
> be the coup de grace of the economy. I think this is the reason
> the Administration is preparing a $2.4 trillion stimulus for February
> 2010. The society is collapsing.

Nov 06 02:38 AM

[ebassa:]

I guess you wachted too many disaster movies


On Nov 05 03:57 PM John Ryskamp wrote:

> The main importance of this figure is to direct attention to the
> supply chain. That is what has begun to collapse, and this will
> be the coup de grace of the economy. I think this is the reason
> the Administration is preparing a $2.4 trillion stimulus for February
> 2010. The society is collapsing.

Nov 06 05:14 PM