Flagstar Cutting Warehouse Lines; Section 502 Loans Move Ahead; Increase in Corporate Debt Issuance; Prepayment Speeds Faster
September 9, 2010 – 8:18 amPosted To: Pipeline Press
“Commercial paper” is used by businesses to finance their own working capital, meet payroll and pay suppliers, etc. From the third quarter of 2007 to that of 2008, GDP grew by 3.4%. Did commercial paper keep up?Heck no! Outstanding commercial paper fell by 25%, that works out to about $600 billion. Even worse…asset-backed commercial paper fell by 40%. If borrowing falls by a large percentage, but GDP remains constant, that is decent proof of a credit crunch. This week the amount of corporate debt being sold is unusually high. In a very basic sense, each dollar of corporate debt sold competes for investment dollars with Agency MBS, Treasuries, municipal bonds, etc. It appears that some companies are using the money they raise to expand, or feel that the financing costs are better than issuing…(read more)