This week's issue of Money Fund Report
iMoneyNet was among the first to report that a consortium of business associations and asset managers have appealed to the U.S. Federal Reserve to include a broader range of commercial paper issuers – specifically those designated as T2 – in the Fed’s new Commercial Paper Funding Facility.
In a March 31 letter to Fed Chair Jerome Powell and reported in iMoneyNet’s Money Fund Report on Wednesday, the consortium members asserted that T2 CP issuers are entirely “investment grade” and present a default rate only “infinitesimally” greater than their T1-rated peers.
“The important point about those issuers,” Tom Deas, Chairman of the National Association of Corporate Treasurers – one of the signatories to the letter – told iMoneyNet’s editor Paul Adams, is that they are ‘investment grade,’ which is to say that, as regulations require, they are backstopped, like T1 companies, by firm credit commitments and related financial support from major banks that more than cover the amount of CP they issue,” and, he added, they are crucial to manufacturing supply chains and represent an $80 billion segment of the short-term funding market. Excluding them puts those companies at a significant disadvantage in offering their debt at longer maturities and more favorable rates.