Commercial paper and LIBOR spreads have soared over the last couple of months to the highest levels since the 2008 financial crisis. The new rules made commercial paper (“CP”) and other credit-sensitive instruments held in institutional prime money market funds subject to being marked-to-market. As commercial paper cheapened, the higher yield became attractive to other US dollar investors who could hold non-government risk. The knock-on effect was higher CP rates to “compete” with risk-free government securities. The higher commercial paper rates will eventually draw in “crossover buyers” to take advantage of the higher rates.

Source: Forbes March 25, 2018 13:52 UTC