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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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From: Paul Kern	9/27/2007 11:40:28 AM
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U.S. Commercial Paper Falls for Seventh Straight Week (Update1) By Mark Pittman Sept. 27 (Bloomberg) -- The U.S. commercial paper market shrank for the seventh straight week as the Federal Reserve's interest rate cut fails to improve conditions for short-term credit. Debt maturing in 270 days or less continued its biggest slump in seven years, falling $13.6 billion in the week ended yesterday to a seasonally adjusted $1.855 trillion, including a $17.3 billion decline in asset-backed commercial paper, according to the Federal Reserve in Washington. The week's decline is smaller than the previous week's drop of $48.1 billion, a sign that buyers are starting to return to the market after the Fed's half-point reduction Sept. 18 in its benchmark interest rate. The lower Fed funds rate is helping to offset investor concerns that losses sparked by defaults on subprime mortgages may spread further into credit markets. ``Stability is what should be expected,'' said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co. in New York and editor of the fourth edition of Stigum's Money Market. ``The weaker economy could cause it to slip, but I feel that most of the purging of issuers deemed risky has already occurred.'' The fall extended a six-week, $354.5 billion drop in outstanding commercial paper as investors retreated to the safety of government debt. Commercial paper is bought by money market funds and mutual funds that invest in short-term debt securities. In asset-backed commercial paper, the cash is used to buy mortgages, bonds, credit card and trade receivables, as well as car loans. Some of the programs are backed by subprime loans, issued to borrowers with poor credit or high debt. To contact the reporter on this story: Mark Pittman in New York at mpittman@bloomberg.net Last Updated: September 27, 2007 10:49 EDT

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