Commercial Paper Market Stable with Spreads Near Historical Lows

The total commercial paper outstanding for the week of February 4, 2026, stands at $1,410.8 billion, marking an increase of $11 billion from the previous week. This growth suggests stable funding conditions, with the current credit spread environment showing a tight 17 basis points between A2/P2 and AA-rated paper, indicating low stress levels in the market.

Outstanding Amounts

The commercial paper market saw a modest increase of $11 billion in outstanding amounts this week, bringing the total to $1,410.8 billion. This growth is within the 52-week range of $1,258.8 billion to $1,472.7 billion, suggesting stability in the market. Financial CP grew by $3.1 billion, while nonfinancial CP increased by $6.1 billion, indicating a balanced demand across sectors. Asset-backed CP also saw a rise, contributing $2.5 billion to the total, reflecting continued investor confidence in this segment.

Interest Rates

Fed Funds: 3.64% | 3M T-Bill: 3.59%

Current CP rates are closely aligned with the Fed Funds rate, with the overnight AA financial rate at 3.62%, slightly below the Fed Funds rate of 3.64%. The 30-day AA nonfinancial rate is marginally higher at 3.63%, while the 90-day AA financial rate stands at 3.70%, indicating a slight term premium. The CP-Fed Funds spread is a negligible -1 basis point, signaling minimal funding stress and suggesting that the market perceives current conditions as stable.

Credit Spreads

The credit spread between A2/P2 and AA-rated commercial paper is currently 17 basis points, which is below the historical median of 24 basis points and sits in the 21st percentile of historical spreads. This tight spread indicates a lack of significant differentiation between credit qualities, reflecting confidence in corporate creditworthiness. Historically, such tight spreads have been associated with stable market conditions, contrasting sharply with periods of financial stress.

Credit Spread Trend

Historical Context

The current credit spread of 17 basis points is in the 21st percentile of historical data, indicating a period of relative calm in the market. Similar spread levels were observed in early 2025 and late 2024, with mixed subsequent S&P 500 returns, ranging from -7.2% to +10.4% over three months. Historically, tight spreads have often preceded stable or positive market conditions, suggesting a cautiously optimistic outlook for risk assets.

Sector Breakdown

The commercial paper market is currently composed of 43% financial, 25% nonfinancial, and 32% asset-backed CP. Financial CP saw a modest increase, reflecting stable demand from financial institutions. Nonfinancial CP also grew, indicating healthy corporate funding needs. The asset-backed segment remains robust, suggesting continued investor confidence in structured finance products, which are crucial for shadow banking activities.

Funding-Sensitive Stocks

Stable CP market conditions are positive for banks like JPMorgan and Bank of America, which are major issuers and investors in CP. Regional banks such as U.S. Bancorp and PNC Financial may also benefit from stable funding costs. Corporate issuers like General Electric and Ford, which rely on CP for liquidity, are likely to find favorable borrowing conditions. Asset managers with money market fund exposure, such as BlackRock, may see stable inflows as CP remains an attractive investment.

Market Implications

The stable CP market suggests low funding stress for banks, which could support net interest margins. Money market funds, key buyers of CP, may continue to attract inflows, maintaining liquidity in the short-term funding market. The tight CP spreads also indicate benign broader credit conditions, with potential positive implications for investment-grade and high-yield spreads. The Federal Reserve is likely to view these conditions as supportive of maintaining current monetary policy settings.