So just so we all understand...
Commercial Paper - https://investingans...ommercial-paper
Commercial paper is an unsecured and discounted promissory note issued to finance the short-term credit needs of large institutional buyers. Banks, corporations and foreign governments commonly use this type of funding.
Commercial paper is issued by a wide variety of domestic and foreign firms, including financial companies, banks, and industrial firms. Major investors in commercial paper include money market mutual funds and commercial bank trust departments. These large institutional investors often prefer the cost savings inherent in using commercial paper instead of traditional bank loans.
Here is a short primer on
Fed Funds and How the Funds Market Works
So... a little reminder... the problems in the 2008 GFC started when the BANKS did not trust each other... Now the Interbank Overnight Rate is BETWEEN BANKS and not other financial institutions and corporations...
There's a message in the bottle folks... it's about EXCESS CASH.
The F'ed is paying banks to hold EXCESS RESERVES - so that is a disincentive to lend to folks like you and me...it is more secure to let the F'eds pay you for excess reserves. Which brings up the proverbial question...why are the banks so paranoid?
Corporations have EXCESS CASH... so much they can throw it away on their employees by showering them with untold riches and benefits, and when they are done with that, they can do stupid stuff like buybacks.
So the commercial paper market if it were a viable option for financing these overnight situation, it would have been used... Commercial Paper is not able to respond to the (overnight) TERMs of the lending... AAPL is not going to set up a facility like this and they would have to risk their $75B (by coincidence) Buyback funding to facilitate it.
Now at the root of everything for the banks... China has a dollar shortage, and that means all of Asia now has a dollar shortage. That creates yield enhanced opportunity for dollar holders. China's #1 Partner is the E.U. Basically their banks are already BROKE...
So there are the underlying stresses that have shown up in this overnight lending...
And from there it depends on your point of view.
If you are a central banker ... you view it as "only" a $75B expansion of the F'ed Balance sheet, because it is a revolving facility (closes out every day)
I'm not a central banker... so my mind goes to the sum total lending of the recycled 75 B's...and that is close to 1/3Trillion dollars this week...
I see a lot of banker rationalization... sounds a lot like Subprime pooh-poohing BurntYankee did in 2007.