The market for corporate borrowing via commercial paper increased to more than $1 trillion outstanding for the first time this year, as investors bought financial institutions’ short-term IOUs even as concern mounts that Europe’s fiscal and currency turmoil may spread.
The seasonally adjusted amount of U.S. commercial paper rose $14.9 billion to $1.009 trillion in the week ended yesterday, the Federal Reserve said today on its website. That’s the highest level since $1.03 trillion on Sept. 21, while the fourth straight weekly increase is the longest streak since the period ended Feb. 8.
Investors are buying short-term obligations from financial institutions because government backing supports many big banks, Simons said. “The banking system is over-reserved and over-protected,” he said.