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U.S. commercial paper supply retreats from four-and-a-half month peak

Kitco News

NEW YORK (Reuters) - The U.S. commercial paper supply decreased this week, retreating from a 4-1/2-month high, as fund managers took a breather from their recent purchases of these debt securities, according to Federal Reserve data released on Thursday.

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

Commercial paper outstanding fell $8.9 billion to $1.081 trillion in the week ended Feb. 6. A week ago, it reached $1.090 trillion, 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, the size of the commercial paper market declined from its the highest level in about 1-1/2 months.

It fell by $21.5 billion, which was its steepest seasonally adjusted decline since the week of Feb. 21, 2018, to $1.057 trillion in the latest week.

(Graphic: U.S. commercial paper supply, money market funds - tmsnrt.rs/2RFdMLr)

Meanwhile, investors put more cash into money funds in the latest week.

Money fund assets grew by $12.41 billion to $3.019 trillion in the week ended Feb. 5, iMoneyNet said on Wednesday.

Prime money funds, which can own commercial paper in addition to Treasury bills, repurchase agreements and agency discount notes, recorded $9.7 billion in inflows in the latest week, according to iMoneyNet.

At the end of December, prime funds owned $304.2 billion, or 39.8 percent of their total holdings in commercial paper, U.S. Securities and Exchange Commission data showed.

(Graphic: U.S. money fund assets - tmsnrt.rs/2N3eZa0)

Reporting by Richard Leong; editing by Jonathan Oatis

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