The asset-backed commercial paper market saw an apparent spike in volume during the first two days of July. According to figures posted by the Federal Reserve, month-end outstandings in June came in at just below $720 billion, though the Fed reports outstanding ABCP at $734.7 billion for Wednesday, July 2, implying a near $15 billion increase in just two days. The market pushed up an additional $7.6 billion to end last Wednesday at $742.3 billion.
In terms of the initial $15 billion two-day spike, whether it reflects an actual surge of issuance is unclear, as the last time numbers showed a significant and unexplained jump, the Fed later footnoted the increase as a reporting anomaly. This time it does not appear to be associated with the inclusion of previously existing programs, an official commented. The Fed's numbers reflect data provided by the Depository Trust Company.
Two ABCP sources said the increase is not entirely out of the norm, as
the market has shown volume movement of that magnitude in the past. However, neither source - one being an ABCP dealer - reported a visible increase in activity.
One possibility entertained by a few market players (though dismissed by a few others), is that certain bank sponsors who are planning to restructure their conduits during the third quarter might have delayed transaction closings until after June 30. Assuming a successful restructuring, these additional assets would never come on balance sheet.
As for the $720 billion figure at the end of the month, ABCP volume declined roughly $17 billion from the close of May to the close of June, while the overall CP market dropped nearly $57 billion. During the same two-day period at the start of July, overall CP increased $11.8 billion.
In its weekly newsletter, Credit Suisse First Boston notes that investors are generally flush with cash at the start of a quarter, perhaps more so after a holiday week, when things are quiet.