April 5, 2018 / 7:08 PM / 18 days ago

UPDATE 1-U.S. commercial paper supply hits 4-month low

 (Adds details, background)
    NEW YORK, April 5 (Reuters) - The amount of U.S. commercial
paper outstanding fell to its lowest in four months in the
latest week as the cost to sell such debt rose to the highest
since the fall of 2008, Federal Reserve data showed on Thursday.
    Short-term private borrowing costs have risen following a
rate hike from the Federal Reserve in March and a surge in
Treasury bill supply that has retreated this week.
    U.S. seasonally adjusted commercial paper outstanding fell
$13.7 billion to $1.048 trillion in the week ended April 4, the
lowest since $1.042 trillion in the week of Dec. 2.
    Non-seasonally adjusted commercial paper outstanding - which
some analysts consider a more reliable reading than the
seasonally adjusted one since it has been distorted by the
financial crisis - decreased by $16.8 billion at $1.067
trillion.
    Moreover, the expected repatriation of dollars from U.S.
companies linked to last year's massive tax overhaul has limited
availability of greenbacks for foreign banks to borrow on the
open market, analysts said.
    Commercial paper, commonly referred to as CP, is short-term
debt that banks, manufacturers and other firms sell to raise
money to finance loans, payrolls and inventories. Money market
funds and other cash investors buy them.
    Back in late January, CP outstanding stood at $1.139
trillion, the highest since August 2011.
    Interest rates on one-month CP issued by banks were
averaging 1.84 percent in the latest week, levels last seen
during autumn 2008 in the aftermath of the collapse of Lehman
Brothers. This compared with 1.81 percent the previous week.
    One-month rates on CP from non-financial companies were
averaging 1.86 percent versus 1.83 percent the prior week, Fed
data showed.
    The increase in CP rates coincides with rising borrowing
costs in other areas of money markets.
    The spread between the three-month dollar London interbank
offered rate             and three-month overnight index swap
rate             narrowed to 60.26 basis points, but it remained
close to its widest since May 2009, Reuters data showed. At the
end of 2017, it was 27.83 basis points.
    The LIBOR/OIS spread is considered a barometer of strain in
money markets.

    
 (Reporting by Richard Leong
Editing by James Dalgleish)
  
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