The Federal Reserve’s decision to buy $600 billion more in Treasuries through June has helped boost demand to exchange floating-rate obligations for fixed- rates, leading to a widening of swap spreads on concern inflation will accelerate, according to Bianco Research LLC.
The amount of short-term IOUs offered in dollars by foreign financial firms climbed to the most in at least 12 years as overseas banks favor debt issuance in the U.S. after the euro reached an almost two-year high against the dollar last month.
The market for U.S. commercial paper snapped the longest losing stretch in at least a decade as investors wagered European leaders would curb the debt crisis and bought short-term IOUs from foreign financial institutions, Federal Reserve data showed today.
From the U.S. to Germany and even Japan, where the bond market is twice the size of the economy, investors can’t get enough government securities even though rising debt loads are blamed for curbing global growth.
The market for corporate borrowing through U.S. commercial paper contracted for the first time in six weeks, led by a decline in issuance from financial institutions, as Europe’s sovereign-debt crisis intensified.
The market for corporate borrowing via commercial paper increased to more than $1 trillion outstanding for the first time this year, as investors bought financial institutions’ short-term IOUs even as concern mounts that Europe’s fiscal and currency turmoil may spread.