Monday, August 16, 2010

Commercial paper comeback


Here's an obscure but important measure of credit availability and financial market health that shows dramatic improvement year to date: nonfinancial commercial paper issuance (i.e., short-term obligations of large, generally highly-rated companies, typically used to fund short-term credit needs such as accounts receivable and inventories). That this measure has jumped over 50% in less than eight months is a very positive sign in my book. For one, it means that credit markets are vibrant: not only are large corporations willing to take on extra debt, but investors are willing to buy it. And since commercial paper rates are extraordinarily low (about 0.25% for 60-day paper), the availability of very cheap financing appears to be encouraging companies to expand their operations.

2 comments:

Buddy R Pacifico said...

This bodes well for lending to small businesses which have been shut out of financing (bank) the last couple of years.

lsfjslfkjlk said...
This comment has been removed by a blog administrator.