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 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 market for corporate borrowing through IOUs expanded to the highest level in eight months as investors turned to alternatives to short-term Treasury bills while a congressional impasse over raising the U.S. debt ceiling threatens to tip the nation into default.
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.
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.