November 1, 2018 / 3:16 PM / 19 days ago

UPDATE 1-U.S. commercial paper supply falls to lowest since January

(Adds background on commercial paper)

NEW YORK, Nov 1 (Reuters) - The amount of U.S. commercial paper outstanding fell to its lowest level since January as non-financial companies cut back their issuance of short-term borrowing in the latest week, Federal Reserve data showed on Thursday.

The rise in short-term borrowing costs for corporations has accelerated in recent days on worries about the government’s growing debt load and the Federal Reserve’s shrinking balance sheet.

Non-seasonally adjusted commercial paper (CP) outstanding - which some analysts consider a more reliable reading than the seasonally adjusted one since it has been distorted by the financial crisis - fell $18.8 billion to $1.058 trillion. This was the lowest level since $1.053 trillion in the week of Jan. 10.

On the other hand, commercial paper outstanding after adjusting for seasonally adjusted factors declined by only $600 million to $1.087 trillion in the latest week.

Non-seasonally adjusted amount of CP from non-financial companies fell by $17.4 billion, while those from financial firms increased by $700 million.

Commercial paper rates have risen to their highest levels in a decade. For example, three-month non-financial CP rates averaged 2.34 percent in the latest week, while three-month financial CP rates averaged 2.43 percent.

A decline in assets among U.S. prime money market funds, which are major CP investors, likely reduced the CP issuance in the latest week.

Prime money fund assets fell to $529.27 billion in the week ended Oct. 20, down from $533.60 billion in the prior week, according to iMoneynet.

Reporting by Richard Leong Editing by Bill Trott

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