UPDATE 1-U.S. commercial paper posts biggest fall since late 2010

Thu Mar 7, 2013 10:53am EST

NEW YORK, March 7 (Reuters) - The supply of U.S. commercial paper recorded its biggest weekly decline in more than two years on reduced demand from money market funds and companies favoring longer-term debt to raise money.

U.S. seasonally adjusted commercial paper outstanding fell $42.5 billion to $1.021 trillion in the week ended March 6 - the lowest level since late November, Federal Reserve data released on Thursday showed.

The decline in commercial paper outstanding was the largest since the $44.3 billion fall recorded in the week ended Dec 1, 2010.

Companies raise short-term cash by selling commercial paper to money market funds and other investors to finance inventories, payrolls and other daily operations.

Non-seasonally adjusted commercial paper outstanding, which some analysts consider more reliable than seasonally adjusted since it has been distorted by the financial crisis, also fell sharply on the week, down $36.3 billion to $1.031 trillion.

U.S. non-seasonally adjusted commercial paper outstanding from foreign financial companies fell $9.4 billion to $230.8 billion in the latest week.

Money market mutual funds, which are buyers of commercial paper, have experienced withdrawals in recent weeks, as investors scooped up stocks and other higher-yielding investments on expectations of continued easy monetary policy from the Federal Reserve and encouraging domestic economic data.

U.S. money market fund assets decreased by $17.50 billion to $2.634 trillion in the week ended March 5, the Money Fund Report said on Wednesday.

On the supply front, the U.S. high-grade corporate bond market has priced $16.67 billion worth of securities after $26.68 billion worth of supply last week, according to IFR, a unit of Thomson Reuters.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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