Commercial Paper Surges $28 Billion as Credit Spreads Reach 75th Percentile

As of the week ending April 08, 2026, total commercial paper outstanding reached $1,361.9 billion. This represents a significant weekly increase of $28.1 billion, signaling a sharp uptick in short-term borrowing needs across the economy. Despite this weekly growth, the market remains $48.1 billion lower on a month-over-month basis. The current credit spread between A2/P2 and AA-rated paper stands at 35 basis points. This spread level is notably higher than the historical median of 24 basis points, placing current conditions in the 75th percentile of historical observations. Investors are closely watching these levels as they indicate a tightening in credit conditions for lower-rated issuers.

Outstanding Amounts

The current total of $1,361.9 billion sits within the 52-week range of $1,288.7 billion to $1,472.7 billion. The $28.1 billion weekly increase suggests that corporations are returning to the short-term debt markets after a period of relative quiet. However, the month-over-month decline of $48.1 billion indicates that the broader trend over the last thirty days has been one of deleveraging. Financial commercial paper led the growth this week, while asset-backed paper saw a slight decline of $5.0 billion. This divergence highlights shifting preferences among different types of issuers and institutional investors. The market is currently positioned in the lower half of its annual range, reflecting a balanced but active funding environment.

Interest Rates

Fed Funds: 3.64% | 3M T-Bill: 3.61%

Short-term funding costs are currently anchored around the 3.6% to 4.1% range depending on credit quality. The overnight AA financial rate is 3.62%, which sits slightly below the effective Fed Funds Rate of 3.64%. For 30-day maturities, AA financial paper yields 3.66%, while nonfinancial paper of the same grade yields 3.74%. This creates a 10 basis point spread for commercial paper over the Fed Funds Rate and a 13 basis point spread over 3-month T-bills. The 90-day AA financial rate matches the 30-day nonfinancial rate at 3.74%, suggesting a relatively flat term structure in the very short end. These rates imply that while funding is available, the cost for nonfinancial corporations is slightly higher than for financial institutions.

Credit Spreads

The credit spread between A2/P2 and AA-rated nonfinancial paper is currently 35 basis points. This spread is a critical barometer for risk appetite, measuring the premium demanded for holding lower-quality short-term debt. At 35 basis points, the spread is significantly above the historical median of 24 basis points, placing it in the 75th percentile of all history. This elevation suggests that investors are becoming more discerning and are demanding higher compensation for credit risk. While not at the extreme stress levels seen in past crises, the widening indicates a cautious shift in market sentiment. Monitoring whether this spread continues to climb toward the historical high of 615 bps is essential for assessing systemic risk.

Credit Spread Trend

Historical Context

The current spread of 35 basis points puts the market in the 75th percentile of historical data, indicating tighter-than-average credit conditions. Historically, the range for these spreads has been vast, spanning from a low of -119 to a high of 615 basis points. When looking at similar historical periods, such as late August 2025 when spreads were at 32 bps, the S&P 500 saw a three-month return of 4.9%. Other parallel periods like June 2025 and January 2024 also showed generally positive forward returns for equities. Specifically, the median forward return for the S&P 500 from these spread levels is +4.3% over one month and +6.9% over three months. These historical parallels suggest that while credit spreads are elevated, they have often preceded periods of equity market strength.

Sector Breakdown

The commercial paper market is currently dominated by the financial sector, which accounts for $561.1 billion or 41% of the total. Financial CP saw the largest weekly growth, increasing by $20.3 billion as banks tapped short-term markets. Nonfinancial commercial paper makes up 27% of the market at $367.0 billion, following a $13.0 billion weekly increase. In contrast, Asset-Backed Commercial Paper (ABCP) represents 31% of the total at $426.0 billion but experienced a $5.0 billion decline this week. This shift suggests that while banks and corporations are increasing their direct borrowing, the demand for securitized short-term debt is softening. The growth in financial and nonfinancial sectors indicates a robust demand for working capital across the broader economy.

Funding-Sensitive Stocks

Funding-sensitive stocks, particularly in the banking and financial services sectors, are directly impacted by these commercial paper trends. The $20.3 billion increase in financial CP suggests that banks are actively utilizing short-term markets to manage their liquidity. For nonfinancial corporate issuers, the 3.74% rate for AA paper represents a manageable but slightly elevated cost of capital. Asset managers who run money market funds are likely benefiting from the higher yields available in the A2/P2 segment. However, the 35 basis point spread indicates that lower-rated companies may face higher hurdles in maintaining their dividend payments or share buybacks. Investors should watch companies with high short-term debt loads, as their margins could be squeezed by these rising spreads.

Market Implications

The current state of the commercial paper market suggests that while liquidity is available, it is becoming more expensive for certain tiers of borrowers. The 13 basis point spread over 3-month T-bills indicates that commercial paper remains a competitive alternative for institutional investors seeking yield. Banks appear to be well-positioned, as evidenced by the large volume of financial CP issuance this week. However, the 75th percentile spread level serves as a warning sign that credit conditions are no longer in an 'easy' phase. If spreads continue to widen, it could signal a broader tightening of credit that might eventually slow economic growth. Money market funds will likely continue to see strong inflows as they capture these attractive short-term rates.