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To: patron_anejo_por_favor who wrote (268300)	11/20/2003 8:38:23 PM
From: Mark Adams	Respond to of 436258

I know you don't think of Commercial paper as 'lending long', so maybe I don't understand what the chart represents. why would a borrower want a "floatee" when long term rates are "low" and spreads are low? Well, spreads are low between credit and treasuries, but the yield curve has incredible steepness. The Floatee terms out his finance needs into say a 3 or 5 year note at 4-5% instead of using CP, then swaps into floating paper paying say 2%. 2% is still higher than CP, but the CFO isn't beholden to continuous credit market access any longer. All of the numbers in the example are made up. I haven't bothered looking at a real world example. Just tossing out a possible explanation for the chart you're watching. BTW, can I assume you are in the 'not enough debt camp', or is that unfair? <g>

To: patron_anejo_por_favor who wrote (268300)	11/20/2003 11:15:06 PM
From: Mark Adams	Respond to of 436258

where's the loan DEMAND America's Business Recovery November 14, 2003 Steven Galbraith, an analyst at Morgan Stanley, reckons that falling tax rates have been one of the least-appreciated factors behind the rise in corporate profits in recent years. But how long can the burden of corporate taxes continue to fall, ask the doubting Thomases, and how long can interest rates stay so low? Bill Gross, an influential bond-fund manager, worries that American firms are generating an unusually large share of their profits from financial bets that depend on interest rates remaining low. Although rates have risen sharply since the middle of the year, long-term rates have softened somewhat recently, prompting fears that the business recovery (which should raise demand for capital, and hence push up interest rates) remains unusually subdued. The interest-rate risk has been reduced to some extent because companies took advantage of favourable market conditions earlier this year to lock in rates for longer terms. In October, the Federal Reserve's figure for outstanding commercial and industrial loans (a proxy for short-term bank borrowing) stood at its lowest level since the summer of 1998. CreditSights, a firm of financial analysts, says it does not think "the numbers necessarily suggest a great deal of borrowing restraint" by companies. They are simply finding funds elsewhere, for longer terms and at more fixed rates. Time to get this show back on the road: Businessmen in America are about to rediscover their animal spirits. Economist Staff, The Economist cfo.com Weekly Supply & Flows Update from CreditSights March 24, 2002 GECC said that it was looking to decrease its reliance on the commercial paper market and that it would be tapping the public markets again to term out CP. ... A big part of the corporate bond supply story in 2001 was the big reduction in non-financial commercial paper; should the financial sector follow in 2002, supply may meet or exceed last year’s record levels. bondweek.com For the truly hardcore <g> Longer Paper Routes Hilary Rosenberg, CFO Magazine October 16, 2003 Banks have gone to greater lengths to keep assets off their balance sheets. That means higher prices for commercial paper. cfo.com\|\|C\|8,00.html