The Federal Reserve's Commercial Paper Funding Facility (CPFF), a move that offers a liquidity backstop for U.S. commercial paper issuers, was launched yesterday.

The Fed said it  will set rates on a daily basis. For today, the Fed announced its rates on three-month commercial paper would be 1.89 %. For ABCP, the rate was set at 3.89 %. Yesterday it was 1.88% and 3.88%, respectively, according to the Federal Reserve Bank of New York Web site.

General Electric Co.,  which is the country's largest issuer of commercial paper, said it accessed the new short-term funding facility while American Express has also registered for the Fed's program, according to published reports.

The CPFF has been structured as a credit facility to a SPV that is authorized under section 13(3) of the Federal Reserve Act. The SPV will function as a funding backstop to facilitate the issuance of term commercial paper by eligible issuers. The Federal Reserve Bank of New York will commit to lend to the SPV on a recourse basis, according to its Web site. It will be secured by all the assets of the SPV.

In related news, last week the Fed also announced the Money Market Investor Funding Facility  (MMIFF). The new Fed program allows registered 2(a)7 Funds to sell qualifying CDs, bank notes and commercial paper to private sector SPVs that have access to loans from the Federal Reserve to buy this eligible collateral. Through this program, the Fed hopes to provide added liquidity to money market funds.

However, even with the new program, research from Credit Suisse said liquidity in the short-end was choppy during last week with many buysiders staying short, especially for bank/financial names. Analysts saw some size bids (50 million to 100 million) on a handful of bank names in the one-month duration bucket.

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