Commercial Paper purge over?

The evaporation of Commercial paper seems to have subsided with the latest figures released by the Federal Reserve showing that during the week to September 12th the total value of Commercial paper outstanding fell just -$8.2 billion. That compares to an average of more than $70 billion per week for the previous 4 weeks.

Financial Paper rose actually rose $11.1 billion whilst Non-Financial paper rose $2.2 billion. However Asset Backed paper dropped -$21.6 billion. Still that compares favorably to the previous 4 weeks that saw an average of $54 billion per week wiped from the Asset Backed paper market.

Tony Crescenzi - a very knowledgeable guy, noted that investors have already pushed out the weakest issuers by refusing to roll over their paper and that the commercial paper that remains is from a relatively more respected crop of issuers.

He also noted that the latest figures may ease pressure on banks, which have been funding companies that can't sell commercial paper. That may also reduce interbank lending rates such as the London interbank offered rate, which last week rose to the highest since January 2001.