Capital Markets

As Bond Market Thickens, Paper Thins

Led by weak financials, the commercial paper market shrinks for the sixth straight week.
Stephen TaubFebruary 23, 2009

The amount represented by of new issues in the corporate bond market continues to expand at a rapid pace. But the commercial paper market keeps shrinking every week.

For the week ended last Wednesday, commercial paper posted its sixth straight weekly decline, according to data from the Federal Reserve Bank. Total outstanding commercial paper fell by $32.6 billion, to $1.521 trillion, in the Feb. 18 period, slightly worse than the $31.5 billion decline in the prior week.

All the decline in the most recent week was posted by financial and asset-backed issuers. Total outstanding paper among financial issuers slumped by $19.2 billion, to $594 billion. The asset-backed market shrank by $13.8 billion, to $722.4 billion. The market for non-financial issuers, on the other hand, inched up by $200 million, marking the third increase in four weeks.

The total commercial paper market now is down from $1.82 trillion more than four months ago and its peak of $2.2 trillion during the summer of 2007.