UPDATE 1-Moody's to set $1 bln commercial paper program

(Adds background)

NEW YORK, Oct 1 (Reuters) - Moody's Corp, (MCO.N) parent of bond ratings agency Moody's Investors Service, said it would set up a $1 billion commercial paper program to lower its borrowing costs.

The move comes at a difficult time for the broader commercial paper market, where companies issue short-term bonds that typically mature in under a year.

Corporate borrowing costs in the commercial paper market have risen dramatically as investors grow increasingly jittery about credit. Some companies have opted to issue longer-term bonds to pay down their commercial paper.

Borrowing costs in the bank loan market have risen as well.

Moody's Corp's commercial paper program is backed by a $1 billion five-year revolving credit facility, which replaces two $500 million bank loans.

Proceeds from commercial paper issuance will be used in part to buy back shares, a Moody's spokesman said.

Moody's has bought back $943 million of shares so far this year. (Reporting by Dan Wilchins, additional reporting by Supantha Mukherjee in Bangalore)