Jump in short-term corporate borrowing boosts economy hopes
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A continuing rebound in the commercial paper market -- a crucial source of short-term funding for companies -- is signaling a further easing of the credit crunch.
Commercial paper outstanding rose $67.6 billion in the week ended Wednesday, to a seasonally adjusted $1.3 trillion, the Federal Reserve reported today.
That marked the eighth straight weekly increase, and lifted the total outstanding to its highest level since early May.
From Reuters:
‘Continued increases in commercial paper outstanding provide some evidence that this market is weaning itself off the extraordinary measures put in place by the Federal Reserve,’ via its Commercial Paper Funding Facility, said Dana Saporta, economist with Stone & McCarthy Research Associates, in Princeton, N.J. ‘To that extent it is a positive sign for those policy-makers looking for signs of normalization of financial market activity,’ Saporta said. Companies use commercial paper to borrow over the short term. The market’s renewed growth is a sign that companies are restocking shelves and even hiring staff in some cases to anticipate an upturn in demand, analysts said. ‘Commercial paper would have no reason to increase if companies weren’t seeing a need to invest,’ said Dan Greenhaus, chief economic strategist with Miller Tabak + Co. in New York.
The report is helping to underpin the U.S. stock market today, which is on track for its fourth straight gain. The Dow Jones industrial average was up 73 points, or 0.8%, to 9,799.11 at about 11:40 a.m. PDT.
-- Tom Petruno