January 31, 2019 / 5:12 PM / 17 days ago

UPDATE 1-U.S. commercial paper market grows for fourth straight week - Fed

* Commercial paper supply highest since September

* Assets of money funds, major CP buyers, have been increasing (Adds background, graphics)

Jan 31 (Reuters) - The amount of U.S. commercial paper rose for a fourth straight week to its highest level since September on revived investor appetite for short-term debt that offers higher yields than Treasury bills, Federal Reserve data showed on Thursday.

Investors have been shifting more cash into money market funds, which are major buyers of commercial paper, since early December, which is likely to have encouraged companies to step up their issuance of these securities.

Commercial paper outstanding climbed by $11.3 billion to $1.090 trillion in the week ended Jan. 30, the highest level since the week of Sept. 19.

Companies issue this type of debt to fund their payrolls and inventories, and banks and dealers use them to finance their loans and trading positions.

After adjusting for seasonal factors, commercial paper rose by $9.9 billion to $1.079 trillion, the highest level in about 1-1/2 months.

Interest rates on three-month commercial paper from high-rated banks averaged 2.50 percent on Wednesday, Fed data showed. This compared with a three-month T-bill yield at 2.42 percent late on Wednesday.

Investors have poured cash into money market funds, which are seen as an alternative to bank accounts, from December through early January to shield themselves from stock market volatility and worries about slowing economic growth.

Money fund assets have grown by a total of $138 billion since early December, according to iMoneynet data.

Money funds lost $8.4 billion in assets in the week of Jan. 29, lowering their total value to $3.007 trillion, iMoneynet said.

But the funds still raised the amount of commercial paper bought, according to Fed data, up $497.3 billion of commercial paper in the week ended Jan. 30 against $491.4 billion a week before.

Reporting by Richard Leong Editing by Sonya Hepinstall

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