Google Inc., owner of the most popular Internet search engine, and Germany’s Merck KGaA are leading a revival in commercial paper as nonfinancial companies grab the biggest share of the $1.1 trillion U.S. market from banks since 2002 amid lower borrowing costs.
Industrial borrowers have $151 billion of debt typically due in 270 days or less, up 47 percent this year and 14 percent of the total outstanding, seasonally adjusted Federal Reserve data show. Google, based in Mountain View, California, started a CP program last month for as much as $3 billion, while Merck helped fund its acquisition of Millipore Corp. in July with the debt.
Three years after the market froze, contributing to the worst financial crisis since the 1930s, the surge in so-called CP issuance may signal that companies are confident the U.S. will avoid slipping back into recession. The highest-rated non-bank issuers pay an annualized 0.27 percent for 90-day paper, compared with an average of 1.94 percent over the past 10 years.
“There’s a sense of confidence in the market,” said Chris Conetta, head of global commercial paper at Barclays Capital in New York. “It’s just so cheap for non-financial borrowers that it’s attracting some back to the market.”
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