commercial paper


Definition of commercial paper

: short-term unsecured discounted paper usually sold by one company to another for immediate cash needs

Examples of commercial paper in a Sentence

Recent Examples on the Web

Around August 10, 2007, commercial paper markets started to seize up, especially in Europe. Edward Lotterman, Twin Cities, "Edward Lotterman: Hooray for complexity in the Federal Reserve’s structure," 3 Aug. 2019 The company submitted subcontracting plans with McDuffie’s cousin listed as chief executive of Potomac Supply Company, a commercial paper supplier. USA TODAY, "Moon trees, moon film, monk honored: News from around our 50 states," 23 July 2019 To make commercial paper strong, manufacturers also add starches. Scientific American, "Put Edible Paper to the Test," 18 July 2019 But there was a huge run — a panic — by institutional investors (pension funds, hedge funds, insurance companies, endowments) that withdrew funds from traditional banks, investment banks and the commercial paper market. Robert Samuelson, Twin Cities, "Robert Samuelson: Tear up the (economic) textbooks — and start over!," 26 June 2019 In addition, the central bank last week raised limits on how much commercial paper brokerages could sell, opening up a bigger channel for banks to raise funds. WSJ, "Key Chinese Lending Rate Hits Lowest Since 2009," 26 June 2019 In 2018, the district started a commercial paper program -- which has allowed the district short-term financing to start projects before the issuance of bonds. Corbett Smith, Dallas News, "Dallas ISD may ask voters for $2.5 billion for its aging schools," 21 June 2019 Third, the structure of corporate debt has become safer, with corporations relying far less on short-term debt obligations, such as commercial paper, bank loans and advances, and refinancing risk has declined. Daan Struyven For Cnn Business Perspectives, CNN, "Corporate debt is rising, but it's safer than it looks," 10 June 2019 Finance executives could resort to selling commercial paper or other short-term financial instruments to meet their funding requirements. Nina Trentmann, WSJ, "Slow Switch to New Rates Leaves European Companies Playing Catch-Up," 16 Feb. 2019

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'commercial paper.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of commercial paper

1836, in the meaning defined above

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Last Updated

7 Aug 2019

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The first known use of commercial paper was in 1836

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More Definitions for commercial paper

commercial paper


Financial Definition of commercial paper

What It Is

Commercial paper is an unsecured and discounted promissory note issued to finance the short-term credit needs of large institutional buyers. Banks, corporations and foreign governments commonly use this type of funding.

How It Works

Exempt from SEC registration, commercial paper generally matures in a short period of time and usually does not exist for more than 270 days. The average maturity of commercial paper is between 30 and 35 days. The average investment is about $100,000, but some commercial paper investments are made in multiples of $1 million or more. It is not uncommon for issuers to adjust the amounts and/or the maturities of commercial paper to suit the investment needs of a particular buyer or group of buyers.

Commercial paper is usually issued by companies with very high credit ratings. Because of this, and because it generally matures in a very short period of time, commercial paper tends to be a very low-risk investment. Most commercial paper is assessed by more than one rating agency. The four primary agencies are: Moody's, Standard & Poor's, Fitch, and Duff & Phelps.

Although commercial paper is occasionally issued as an interest-bearing note, it typically trades at a discount to its par value. In other words, investors usually purchase commercial paper below par and then receive its face value at maturity. The discount, or the difference between the purchase price and the face value of the note, is the interest received on the investment. All commercial paper interest rates are quoted on a discounted basis.

Why It Matters

Commercial paper is issued by a wide variety of domestic and foreign firms, including financial companies, banks, and industrial firms.

Major investors in commercial paper include money market mutual funds and commercial bank trust departments. These large institutional investors often prefer the cost savings inherent in using commercial paper instead of traditional bank loans.

Source: Investing Answers

commercial paper

Legal Definition of commercial paper

see paper

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not constant or steady

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