FT Alphaville » Commercial paper

Some sun in an otherwise cloudy money market

Tracy Alloway — Tue, 28 Jun 2011 08:51:33 +0000

US commercial paper issuance has rebounded to its highest level in nearly two years as companies and banks take advantage of low interest rates, says the FT. While the market for short-term debt issuance has grown, it is unlikely to reclaim the heights seen in 2007, when reliance on such funding was a key element in fuelling the pre-crisis credit bubble. US issuance has risen to $1,227bn, according to the latest weekly data. However, Bloomberg adds that the European debt crisis could pose a threat to money market funds if a rash of sovereign defaults caused big banks to fail to meet obligations within the next three months. Zero Hedge asks if general collateral is the next ‘buck-breaking” source of frozen liquidity.

Continue reading: Some sun in an otherwise cloudy money market

China’s crouching commercial paper, hidden loan targets

Tracy Alloway — Mon, 10 Jan 2011 14:12:50 +0000

As western commercial paper continues to wither, the eastern stuff is on the up.

Bloomberg wrote on Friday about surging commercial paper sales in China — as companies tap the short-term paper instead of getting loans from banks:

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A slow, speedy death for BofA’s conduits

Tracy Alloway — Mon, 10 Jan 2011 12:06:19 +0000

Bye, bye Bank of America commercial paper conduits. We knew you well.

From Asset-Backed Alert:

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Revelations – and junk – inside Fed data drop

Joseph Cotterill — Fri, 03 Dec 2010 10:09:52 +0000

Banks flooded the Federal Reserve with billions of dollars in “junk bonds” and other low-grade collateral in exchange for much-needed liquidity during the crisis, the FT reports from its analysis of data released this week. More than 36 per cent of the cumulative collateral pledged to the US central bank in return for overnight funding under the Primary Dealer Credit Facility was equities or bonds ranked below investment grade. A further 17 per cent comprised unrated credit. Other PDCF revelations are also emerging. The NYT latches onto lesser-known but telling users of the facility as it builds a picture of how the Fed used hedge funds to support the flow of credit, while Bloomberg notes how the Fed lent to investors which helped it design the rescue programs being used.

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Winding down at the BoE

Tracy Alloway — Mon, 15 Nov 2010 15:52:46 +0000

What’s this? Some good news from the Bank of England?

Out this Monday — a slew of announcements related to the Old Lady’s support programmes for British credit. They include (drumroll please) the following:

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Money market funds meet moral hazard

Tracy Alloway — Thu, 23 Sep 2010 12:30:42 +0000

Cast your minds back to August 2007, when money market funds were experiencing their first major crisis. It was far less sexy than what was to follow in September 2008 — when Reserve Primary notoriously broke the buck and sent money markets into panic — but it was one of the earlier manifestations of the credit crunch.

In 2007, as demand for Asset-Backed Commercial Paper (ACP) rapidly dissipated, the money market funds (MMFs) which invested in ABCP were rocked by credit and liquidity issues.

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The (near) cash! The (near) cash!

Tracy Alloway — Tue, 31 Aug 2010 07:42:57 +0000

Short-selling info firm, DataExplorers, reports on Tuesday that the amount of commercial paper (CP) and certificates of deposit (CDs) -- otherwise known as ‘near cash' instruments -- held by custodians has quadrupled over the past six months. The thing about commercial paper and CDs is that they're relatively safe to own, says FT Alphaville, but typically pay no or very little interest -- in other words, they're not the highest-yielding of assets.

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Mi casa es su casa – Spanish clearing and collateral

Tracy Alloway — Wed, 25 Aug 2010 08:56:22 +0000

Has LCH.Clearnet single-handedly saved the Spanish financial system?

Early this month, and as the FT Trading Room reported, the Anglo-French clearing house announced a new service for Spanish government bonds and repos. And Spanish banks, as we all know now, have plenty of Spanish bonds.

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Moody’s on ‘breaking the buck’ – and 208 near misses

Tracy Alloway — Tue, 10 Aug 2010 11:00:01 +0000

Some 13 months and seven days ago, we were struck with a certain catastrophe.

Reserve Primary Fund — a money market mutual worth about $64.8bn in September 2008 — broke the buck. In other words, its net asset value fell below $1 a share — something which was never supposed to happen.

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How Dodd-Frank travels – all the way to Canadian ABCP

Tracy Alloway — Fri, 30 Jul 2010 12:00:26 +0000

DBRS’s Andrew Fitzpatrick has a wonderfully understated way of putting things:

. . . it would be something between ironic and sad if the best-laid plans of the Montréal Accord, a difficult but ultimately successful private-sector restructuring in response to the financial crisis, that was a year-and-a-half in the making, were to be undone by a foreign government’s response to that same crisis. It is a small world after all.

Continue reading: How Dodd-Frank travels – all the way to Canadian ABCP