The market for corporate borrowing through commercial paper contracted by the most in more than two years as U.S. money-market funds reduce purchases of the short-term IOUs.

The seasonally adjusted amount of U.S. commercial paper plunged $42.5 billion to $1.02 trillion outstanding in the week ended yesterday, the sixth decrease in seven weeks, the Federal Reserve said today on its website. The decline was the biggest since the week ended Dec. 1, 2010 when the market fell $44.3 billion, and the lowest level outstanding since Nov. 21.

Demand from money-market funds, among the biggest buyers of commercial paper, has declined this year, while companies have been able to issue longer-term debt in the corporate-bond market at about record-low borrowing costs. Total assets in the funds have decreased to $2.663 trillion in the week ended Feb. 27 from $2.716 trillion for the period ended Jan. 9, according to the Investment Company Institute.

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