The amount invested in US commercial paper market fell by $95bn during past week (This is the biggest weekly drop since this sector has been tracked) as banks and insurers were unable to find buyers for the short-term debt amid the worst U.S. financial crisis since the Great Depression. More than $200bn has been taken out from this market in past three weeks. Of the $95bn weekly drop to $1,600bn, financial paper accounted for most of the decline falling $65bn; followed by asset-backed commercial paper which fell by $29bn.
– Source: Bloomberg & Financial Times
Commercial paper is a money-market security issued by large banks and corporations. It is generally not used to finance long-term investments but rather to purchase inventory or to manage working capital. It is commonly bought by money funds (the issuing amounts are often too high for individual investors), and is generally regarded as a very safe investment. As a relatively low-risk investment, commercial paper returns are not large.
Please enrol me for the free email course
on Basics of Accounting for Financial Instruments
Join our mailing list to receive the latest news and updates from our team.