November 20, 2014 / 4:22 PM / 3 years ago

UPDATE 1-U.S. commercial paper supply grows to highest in 11 months

(Adds detail, background)

NEW YORK, Nov 20 (Reuters) - The amount of U.S. commercial paper expanded to its highest level in 11 months, suggesting company demand for credit to finance their payrolls and inventories, Federal Reserve data showed on Thursday.

Adding to the growth in this bond sector has been likely buying from money market mutual funds, which are major holders of these ultra short-dated debt.

U.S. seasonally adjusted commercial paper outstanding rose $11.1 billion to $1.091 trillion in the week ended Nov. 19 - the highest since the $1.101 trillion recorded in the week ended Dec. 25, 2013.

More than half of the week’s increase stemmed from a $6.8 billion rise in issuance from domestic non-financial companies.

Commercial paper supply from domestic financial firms grew by $3.9 billion to $290.8 billion.

Commercial paper activity going into year-end from U.S. manufacturers was unclear after two reports released on Thursday.

The Philadelphia Federal Reserve said its business activity index on the U.S. Mid-Atlantic region jumped to its strongest level in nearly 21 years in November.

Financial data firm Markit said its preliminary U.S. Manufacturing Purchasing Managers Index for October fell to its lowest level since January.

Non-seasonally adjusted commercial paper outstanding - which some analysts consider a more reliable reading than the seasonally adjusted one since it has been distorted by the financial crisis - rose $16 billion to $1.033 trillion.

The non-seasonally adjusted figure rebounded from a 10-month low of $1.017 trillion set last week.

Domestic money fund assets rose $15 billion to $2.679 trillion in the week ended Nov. 18, the Money Fund Report said on Wednesday. Since late September, their assets have increased by nearly $75 billion, according to the report published by iMoneynet.

The amount of commercial paper which regulated money funds could purchase rose by $12.3 billion on a non-seasonally adjusted basis to $671.8 billion in the latest week. (Reporting by Richard Leong)

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