Commercial Paper [CP;ABCP]

Commercial paper is unsecured, short-term debt issued by corporations to finance short-term liabilities like payroll, accounts payable, and inventories. Maturities range from 1 to 270 days (avoiding SEC registration requirements), with most under 30 days. Only companies with high credit ratings can access this market efficiently. For example, Apple might issue 30-day commercial paper at 5.5% to manage cash flow. The commercial paper market totals about $1 trillion, providing crucial short-term corporate funding. Interest rates typically run slightly above Treasury bills but below bank loans. During the 2008 crisis, the commercial paper market froze, prompting the Fed to create the Commercial Paper Funding Facility. Asset-backed commercial paper (ABCP), backed by receivables or other assets, comprises a significant segment. Most commercial paper is held by money market funds, making these funds vulnerable to corporate credit events. The market serves as an important indicator of short-term credit conditions and corporate health.