Monday, August 5, 2013

Commercial Paper Outstanding

Click to enlarge.

October 7, 2008
FRB: Press Release

The commercial paper market has been under considerable strain in recent weeks as money market mutual funds and other investors, themselves often facing liquidity pressures, have become increasingly reluctant to purchase commercial paper, especially at longer-dated maturities. As a result, the volume of outstanding commercial paper has shrunk, interest rates on longer-term commercial paper have increased significantly, and an increasingly high percentage of outstanding paper must now be refinanced each day. A large share of outstanding commercial paper is issued or sponsored by financial intermediaries, and their difficulties placing commercial paper have made it more difficult for those intermediaries to play their vital role in meeting the credit needs of businesses and households.

As seen in the following chart, problem "solved".

Click to enlarge.

For what it is worth, I continue to believe that this economy cannot tolerate high real interest rates any longer. It's just way too leveraged. As seen in the first chart, the epic exponential trend failure in commercial paper outstanding began in 2004. As seen in the second chart, interest rates on commercial paper started to rise in 2004. I doubt very much that was just a coincidence.

March 27, 2012
Wrong Way Siegel Strikes Again

Click to enlarge.

Hello? Interest rates way too high relative to trend? Could someone please explain how Ben Bernanke became Time Magazine's 2009 Man of the Year? Seriously, I'd really like to know.

Just opinions. This is not investment advice.

Source Data:
St. Louis Fed: Commercial Paper Outstanding
St. Louis Fed; 3-Month AA Nonfinancial Commercial Paper Rate


Stagflationary Mark said...

Just to be clear, the exponential trend line in the first chart excludes the data in blue.

mab said...

For what it is worth, I continue to believe that this economy cannot tolerate high real interest rates any longer.

I'll add that this economy can't tolerate high nominal rates either. ZIRP ain't going anywhere imho.

Stagflationary Mark said...


Yeah, it's not like any of the charts in this post are adjusted for inflation.

I just think in "real" terms as a saver because it is what matters most to my nest egg, and because I therefore feel safer owning inflation protected treasuries. I haven't exactly needed the extra insurance over the last decade though, much to the dismay of the perma-hyperinflationists.

TJandTheBear said...

Most households cannot tolerate a missed paycheck. Does that ever stop it from happening?

Stagflationary Mark said...


Most households cannot tolerate a missed paycheck. Does that ever stop it from happening?

No, it does not stop it from happening. Agreed. I would argue that we could easily have ZIRP for a very long time because many households cannot tolerate a missed paycheck.

What generally happens to prices, if for whatever reason, many global households stop making purchases?

Retail Price of Coffee for New York, NY & 3-Month Treasury Bill Yields (1930s)

Coffee prices in black (left scale).

3-Month Treasury bill yield in red (right scale).

There has been nearly 5 years of ZIRP and yet oil prices are still nowhere near the peak set in 2008. As seen here, we're not even above the temporary peak set back in 2011 (or the even lower temporary peak set in 2012).

Demand destruction (total vehicle miles driven) has a lot to do with it in my opinion.

I'm even starting to buy in to the argument that rising oil prices are ultimately deflationary. It could easily be the straw on the camel's back when it comes to visiting our country's many malls and restaurants. Instead, we'll just stay home watching our big TVs and ordering goods from Amazon (which is also deflationary if one were to ask a Sears employee).

And as for China, if we can't tolerate higher oil prices then they certainly can't either. I have not been bullish on China long-term, and hindsight has been kind.

May 17, 2012
Savvy Chinese Strike Again!

China's consumer confidence in the first quarter rose to its highest level since 2005 because of falling inflationary pressure and the government's determination to deflate property bubbles, analysts Nielsen said in a report on Thursday.

I had but one thing to say in response.

Nothing inspires confidence like a popping real estate bubble!

Heckling Chinese optimism has been like shooting fish in a barrel, lol. Sigh. Sorry. Gallows humor.

August 2, 2013
China Consumer Sentiment Falls to 18-Month Low

"Confidence tanked across the board as worries about household finances, employment and prices all came to a head."

Big shocker.