October 30, 2008 12:53PM

Tracking the Thawing of Commercial Paper

By Ray Hennessey

When companies talked about a freezing in the credit market, they mentioned the shrinking of the commercial paper market as Exhibit A. Well, now there are signs that's thawing. Commercial paper outstanding grew last week by $100 billion -- its first increase in seven weeks, according to Tony Crescenzi at Miller Tabak.

So stayed tuned at 4:30pm when the Fed releases its weekly statistics, which include the first indication of how much of this new paper was bought by the Federal Reserve. If it is essentially responsible for all the rise, it's a step in the right direction, but says we're a long way from normalcy. (After all, the government should not be the primary buyer of corporate debt.) An unlikely scenario would be that the good ol' regular buyers were coming in, which would be an extraordinarily positive sign for the markets, but don't hold your breath.

At minimum, the Fed's report gives us a baseline. It would be good if its first report is also the high-water mark.