• 681 days Will The ECB Continue To Hike Rates?
  • 681 days Forbes: Aramco Remains Largest Company In The Middle East
  • 683 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 1,083 days Could Crypto Overtake Traditional Investment?
  • 1,087 days Americans Still Quitting Jobs At Record Pace
  • 1,089 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 1,092 days Is The Dollar Too Strong?
  • 1,093 days Big Tech Disappoints Investors on Earnings Calls
  • 1,094 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 1,095 days China Is Quietly Trying To Distance Itself From Russia
  • 1,096 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 1,099 days Crypto Investors Won Big In 2021
  • 1,100 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 1,101 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 1,103 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 1,103 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 1,106 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 1,107 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 1,107 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 1,109 days Are NFTs About To Take Over Gaming?
Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

How Millennials Are Reshaping Real Estate

How Millennials Are Reshaping Real Estate

The real estate market is…

  1. Home
  2. Markets
  3. Other

How Commercial Paper Prices In Economic Recession

In what is becoming a multi part series on how various products price in recession tonight it is time to check out the commercial paper markets. Below are two charts (1) showing the last two recessions and how commercial paper rates performed and (2) commercial paper rates since Q2 2009. Both charts utilize non financial AA rated 30 and 90 day terms. The results were similar for financial paper as well.

Commercial paper seems to be an excellent market timer of economic recession. Notice the last two periods where rates began falling precipitously and the timing of economic contraction.

It is also interesting to note prior to the 2008 recession rates began moving higher as the economy expanded. Since the 08 recession theoretically ended no such move up in rates has occurred. Whether that is the reality that no real expansion has occurred and or simply an abundance of liquidity in the market is unclear.

NonFinancial AA Commercial Paper 2000-2011

To capture changes in commercial paper rates since Q2 2009 a zoomed in chart is presented below. Again notice the fall off in rates albeit from lower levels and the corresponding move lower in GDP.

A similar pattern has developed where rates on 90 day paper have fallen from 34 to 14 basis points and GDP appears to be trending lower. What's "different this time" is the starting point of GDP versus the June 2009 drop off in rates was about 3% higher in real GDP terms.

Should GDP respond to changes in rates as it did in late 2009 then economic contraction is highly probable in 2011.

NonFinancial AA Commercial Paper 2009-2011

 

Back to homepage

Leave a comment

Leave a comment