Despite reports of increased origination activity, outstanding asset-backed commercial paper continued to slide last week, declining to just $1.4 billion above the $700 billion threshold, according to Wednesday numbers provided by the Federal Reserve.
Month-end outstandings haven't been below $700 billion since August 2001. Last week, Standard & Poor's released a report anticipating renewed growth in the corporate commercial paper market, hand-in-hand with a quicker economy and attractive sell-side conditions.
"If the economic recovery continues, coinciding with a rise in inventory levels and capacity utilization, companies are likely to seek additional funding in the commercial paper market," S&P reports.
Hopefully, these sentiments will trickle into ABCP deals as well, or else the asset-backed component of overall outstandings will fall. At the end of January, ABCP was 52.91% of the market, down from a steady run of more than 55% through several months of 2003.
In other news, West LB recently changed the name of its newly acquired SIV to Harrier Finance from Rathgar Capital, as it was named when the German bank acquired it from CIBC World Markets and West End Capital Management.
According to industry sources, West LB will likely transfer assets from its existing securities arbitrage programs into Harrier because of the lower liquidity requirements associated with SIVs. West LB, as well as other Landesbanks, is in danger of having its short-term rating lowered as the German government reneges its guarantees in the coming year. In late 2003, Standard & Poor's announced that it would apply "natural" ratings to the Landesbank's one full year ahead of the guarantee removal.
Also last week, Credit Suisse First Boston gave a brief conference call discussing the trend toward extendible note structures to lower liquidity requirements. These currently make up about 10% of the market, CSFB said. Interestingly, according to CSFB, there has never been an extension of an extendible.