September 26, 2019 / 7:27 PM / a month ago

UPDATE 1-U.S. commercial paper supply posts biggest rise since April

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NEW YORK, Sept 26 (Reuters) - The amount of U.S. commercial paper outstanding registered its biggest weekly increase since April, reversing nearly all of the prior week’s decline, as money markets stabilized following last week’s turmoil, according to Federal Reserve data on Thursday.

Non-seasonally adjusted commercial paper outstanding rose $18 billion to $1.110 trillion in the week ended Sept. 25. This was the steepest weekly rise since a $29.35 billion jump in the week of April 17.

U.S. seasonally adjusted commercial paper (CP) outstanding - which some analysts consider a less reliable reading than the non-seasonally adjusted one since it has been distorted by the financial crisis - rose by much less at $3.8 billion to $1.097 trillion in the latest week.

Borrowing costs in the CP market have subsided from last week’s peaks, which were last seen during the height of the global credit crisis in 2008.

Analysts have blamed quarterly corporate tax payments and settlement on $78 billion in coupon-bearing Treasury securities on Monday for a severe drop in cash for wholesale lending. They also attributed the market turbulence to a scarcity of excess reserves.

Since last Tuesday, the Federal Reserve has flooded tens of billions overnight and term cash into the bank system to provide more liquidity, which has kept a lid on money market rates.

For example, one-day CP rates for AA-rated non-financial companies averaged 1.90% on Wednesday, down from 1.91% on Tuesday. They reached 4.26% last Tuesday, N.Y. Fed data showed. (Reporting by Richard Leong Editing by Nick Zieminski)

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