Corporate Debt as an Economic Indicatorby Chris Seabury
Commercial papers are unsecured debts used by banks or companies to finance their short-term needs. These needs can range from accounts receivable (AR) to payroll to inventory. Generally, maturities for commercial paper range from overnight to nine months. Higher interest rates make it more difficult for businesses to obtain the money they need to fund their day-to-day operations so that they can continue to expand. These high rates can cause businesses to pay the higher costs or not borrow at all. This creates a situation in which companies look for ways to get the money they need to fund their short-term operations; when more commercial paper is issued, this can be a sign of a tight credit market.