The 2008 financial crisis may have forever changed the US commercial paper market. Not only is the total amount of commercial paper outstanding still 50% less than its peak it 2007, the internal composition of the commercial paper market has changed dramatically as well.
In 2007, only about 8-9% of the commercial paper market was made up of nonfinancial commercial paper. Today, a quarter of the total amount outstanding comes from nonfinancial firms. The change has occurred for two reasons. First, the total amount outstanding has increased by about $100 billion since 2007. However, the bigger change has been the complete collapse of the asset-backed commercial paper market. The good news is that for the first time in years asset-backed commercial paper is showing some signs of life.
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At its highest point in 2007, asset-backed commercial paper accounted for 55% of the total amount of commercial paper outstanding. Put another way, the total amount of asset-backed commercial paper outstanding was over 8% of US GDP! Today, it’s down to just a quarter of the total amount outstanding and is only 1.5% of GDP. In aggregate, the amount outstanding of asset-backed commercial paper has fallen from $1.2 trillion in 2007 to $269 billion today. However, as we said earlier, for the first since the GFC the market is showing signs of life. The total amount outstanding has increased 23% year-over-year and is up about $45 billion from the low in 2015. The average amount issued per filling has slowly increased as well even as the number of fillings remains near 15-year lows. It seems that after 9 long years the asset-backed commercial paper market may have finally be healing.