Reuters writes "Fed may announce commercial paper facilities Sunday -BofA," which tells us, "The Federal Reserve may announce measures on Sunday night aimed at bolstering liquidity in the commercial paper market, used by companies for short-term loans, analysts at Bank of America wrote. The bank's analysts said they believe the Fed will announce a Commercial Paper Funding Facility, an operation previously used in 2008 in which the Fed buys commercial paper from issuers directly, and a Commercial Paper Dealer Purchase Facility in which the Fed would buy commercial paper from dealers directly. The measures, if taken, would be aimed at buffering the market ahead of potentially large outflows from money market funds in coming days, analysts at the bank wrote." They quote the BofA report, "We believe it imperative the Fed roll out these facilities on Sunday night given the looming expected prime (money market fund) outflows and necessity of their ability to sell (commercial paper) in order to raise cash.... If the Fed waits too long the (money market fund) outflow pressure could mount and the risk of a large scale (money market fund) run could increase." The Reuters piece adds, "Investors are demanding the highest premium since March 2009 to hold riskier commercial paper versus the safer equivalent, according to Refinitiv Eikon data. The spread between the overnight AA-rated paper of nonfinancial companies versus riskier overnight P2 paper rose to 73 basis points on Thursday, the most recent data available from the Federal Reserve." (Note: Crane Data's latest Money Fund Portfolio Holdings show that Commercial Paper makes up just $324.1 billion or 8.5% of the assets in Taxable money market funds.) See also Bloomberg's "Key Source of Corporate Cash Seizing Up Amid Credit Market Rout".

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