Consistent with the growth in corporate bonds (discussed here), corporate commercial paper outstanding hit a new record recently - exceeding the pre-crisis highs on a seasonally adjusted basis. These of course are the largest and the highest rated corporations who use the CP market to manage cash flows. The mid-sized and smaller firms do not have access to this market. Also it's important to note that corporate CP constitutes just over a quarter of bank CP, which still dominates the market.
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| Non-financial commercial paper outstanding (SA, source: FRB) |
Who is buying this paper? Interestingly enough the purchasers (other than the usual suspects such as money market funds) often tend to be other corporations who have massive amounts of cash on their balance sheets. They buy CP (as well as other short-term instruments) as a substitute for bank deposits to boost yields.
WSJ: - Commercial paper accounted for 11.06% of corporate cash assets at the end of January, an increase of 1.19 percentage points from a month earlier, representing the biggest jump among all assets categories, according to data from Clearwater Analytics....
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