Short-Term Borrowing Rates Plunge To A 4-Year Low

Corporate short-term borrowing costs have now plunged to a four year low after the Fed accelerated efforts to open up the commercial paper market by providing loans to money market funds that buy the debt. Yesterday, the Federal Reserve committed to providing as much as $540 billion in loans to relieve the stress on money-market funds.

For example, Bloomberg reported rates on the highest-ranked 30-day commercial paper dropped 1.46% points, the most on record, to 1.92%. Also, rates on the overnight and 90-day paper declined.

Commercial paper usually matures in 270 days or less, is used by companies to finance payroll, rent and other daily expenses. JPMorgan Chase & Co. (NYSE: JPM) will run five special units that will buy certificates of deposit, bank notes and commercial paper issued by highly rated financial companies with a remaining maturity of 90 days or less under

Borrowers wanting to use this facility were able to begin registering October 20th for the Commercial Paper Funding Facility, which the Federal Reserve Bank of New York created October 7th to inject liquidity into the market and ensure companies can borrow short-term debt.

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