2 min readAbstract BBB and Tier 2 rated debt instruments have evolved to a much larger presence in the short-duration corporate debt market than a decade ago. Default experiences and rating migration data suggest moderately higher credit risk than A-rated instruments, while expected returns also were higher. This ratings category opens up an opportunity set not found…
2 min read“Change is the law of life. And those who look only to the past or present are certain to miss the future.” — John F. Kennedy Abstract Collateralized commercial paper (CCP) made its debut last November to institutional cash investors. This new structure allows investors to purchase commercial paper from entities conducting term repos with…
2 min readExecutive Summary Tip No. 1: In a market that lacks liquidity, CPFF means liquidity. Tip No. 2: When a firm can no longer access CPFF, liquidity may deteriorate rather rapidly. Tip No. 3: Despite the appearance to the contrary, not all CPFF-eligible issuers are the same. Tip No. 4: CPFF eligibility and credit ratings are…
2 min readIn April 2007 increasing losses sustained by bonds with exposure to subprime mortgages became apparent. [See “The Subprime Flu,” April 2007] In the months that followed, this brought on a widespread credit contagion and took many investors by surprise. Among the hardest-hit areas was the short-term credit market that came to a screeching halt in…
1 min readExecutive Summary ABCP can be a good investment choice in large corporate treasury accounts due to the depth, liquidity, flexibility, and yield potential of the asset class. ABCP gained popularity recently because increased event risk of corporate names resulted in concern about unsecured commercial paper. A potential investor of ABCP should carefully review the strength…
3 min readWhat is 4(2) Commercial Paper? Commercial Paper is a short-term unsecured promissory note to repay a fixed amount on a certain future date. The product is exempt from SEC registration according to one of the following sections of the Securities Act of 1933: 3(a)(3), 4(2), and 3(a)2. Today, the US commercial paper market is the…