January 24, 2019 / 4:29 PM / 24 days ago

UPDATE 1-U.S. commercial paper supply grows to highest since Sept

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NEW YORK, Jan 24 (Reuters) - The amount of U.S. commercial paper has climbed to its highest level in nearly four months as investors pile into money market funds which are major buyers of this type of corporate debt, Federal Reserve data released on Thursday showed.

Institutional money managers have also ratcheted up their purchases of commercial paper as an alternative to other short-term debt securities such Treasury bills and repurchase agreements, analysts said.

Commercial paper outstanding increased by $12.3 billion to $1.079 trillion in the week ended Jan. 23, the highest level since the week ended Sept. 26.

Companies issue this type of debt to fund their payrolls and inventories, and banks and dealers use them to finance their loans and trading positions.

After adjusting for seasonal factors, commercial paper rose by $3 billion to $1.069 trillion in the latest week.

Investors have poured cash into money funds since late 2018 in an effort to shield themselves from stock market volatility and worries about slowing economic growth.

Money market funds, which are seen as a tad riskier than bank accounts, posted a $2.69 billion increase in assets, bringing their total to $3.015 trillion in the week ended Jan. 22, the Money Fund Report said on Wednesday.

The sum of commercial paper, which SEC-regulated money funds can buy, increased to $491.4 billion from $488.4 billion a week earlier.

Reporting by Richard Leong Editing by Sonya Hepinstall

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