Flushing Bad Paper

Did somebody say toxic assets? Even previously trustworthy financial products are getting caught in the mortgage-backed finance contagion. Chief among those are asset-backed commercial paper, those short-term instruments issued by big companies to help finance their operations. They’re often seen as good, safe investments by money market fund managers and institutional investors.

These daily data compare issuance of AA asset-backed commercial paper maturing in one to four days with issuance of such paper maturing in 80 days or more. Our graph begins on March 17, the day the feds facilitated JPMorgan’s takeover of Bear Stearns. Right into mid-September, the market remained confident and demand stayed high for longer-term paper.

But now folks aren’t willing to park their cash for too long with any institution that’s not the Treasury. From 665 issuances on Sept. 9, long-term market have skyrocketed, and the market has dried up, falling more than 90 percent in just three weeks. Meanwhile, people are flocking to buy paper that matures in less time than your average Drosophila. Even titan General Electric is playing defense. Its huge capital arm is reportedly cutting back its share of debt funded by ABCP to 10 percent from 15 percent.

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Headline	Date	Dept.
Inflation's Sum and Its Parts	September 08, 2008	economics, finance
Mothers and Twins	September 22, 2008	demographics, pharmaceuticals
Finance Behemoth	September 29, 2008
Evaporation	September 30, 2008
Flushing Bad Paper	October 01, 2008	finance