Commercial Paper

Commercial paper provides corporations with cost-effective short-term funding for working capital, inventory, and payroll needs. Maturities typically range from overnight to 270 days to avoid SEC registration requirements. Only highly-rated corporations can access commercial paper markets due to unsecured nature and short maturities. Interest rates are typically lower than bank loans due to direct access to institutional investors. Commercial paper is issued through dealers or directly to investors, with active secondary markets providing liquidity. Money market funds are major investors, seeking safe, short-term returns. The market faced stress during financial crises when investors fled to safer assets, leading to Federal Reserve support programs.