After a $42 billion contraction in September, in the first week of October, Euro Commercial Paper markets expand by $12 billion.
This is the first expansion the Euro Commercial Paper market has seen since the start of the credit crisis in early August. The expansion mainly came from issuance by Banks who grew their outstanding amounts by 87% against redemptions. This was followed by Corporate and Sovereign issuers, who each expanded 33% against maturing papers in the first week of October.
Asset-Backed and Structured Investment Vehicles, however, continued to contract. This is currently going at a rate of 50% against maturing ECP. A greater reliance by these entities on bank standby facilities is requiring the banks to finance more in the ECP markets themselves.
The $12 billion increase comes at a crucial time where confidence needs to be rebuilt between market participants and investors. Whilst overnight rates are stabilising, the three-month sector remains tense.
The month of September came to be the worst month of the year so far with the ECP markets contracting outstanding amounts by more than $42 billion.