According to the Federal Reserve, the level of outstanding asset-backed commercial paper dropped by $11 billion (1.2%) to $888.3 billion during the week ended yesterday. This drop marks the 10th straight decline, a period during which commercial paper has seen a drop of 25%. This 25% decline has squeezed mortgage lenders of their financing, causing a group of major banks to announce a special fund that will help them refinance the securities that have been locked out of the paper market. During the week, the overall commercial paper market saw outstandings increase by $1.3 billion, to $1.87 trillion.
According to analysts at Action Economics, with time, the commercial paper problem is increasingly targeted just in the asset-backed portion of the market. In addition to this data, the Federal Reserve added $28.25 billion of temporary reserves to the banking system this morning through 3 repos (repurchase agreements) through the New York Fed's Open Market Desk, this action has earned today the moniker Repo Thursday. The action should supply funds and keep the overnight lending rate close to the Fed's target of 4.75%.