Commercial Paper Outstanding Hits $1.4 Trillion as Credit Spreads Remain Stable

Total commercial paper outstanding reached $1,406.7 billion for the week ending February 25, 2026, marking a modest weekly increase of $2.5 billion. The current spread environment remains benign, with the 30-day AA financial rate sitting at 3.67%, just slightly above the Fed Funds rate. This stability indicates that short-term liquidity remains accessible for high-quality borrowers.

Outstanding Amounts

The $1,406.7 billion in total outstanding paper reflects a steady growth trend, increasing by $6.9 billion over the past month. Current levels sit comfortably within the 52-week range of $1,288.7 billion to $1,472.7 billion, suggesting no immediate contraction in credit supply. The weekly gain of $2.5 billion was supported by nonfinancial issuers, who added $6.1 billion in new paper. This expansion indicates that corporations are actively utilizing short-term markets to manage working capital. Overall, the market shows resilience without signs of the rapid deleveraging seen during periods of stress.

Interest Rates

Fed Funds: 3.64% | 3M T-Bill: 3.60%

Commercial paper rates are currently tightly aligned with benchmark interest rates, with the overnight AA financial rate at 3.62% compared to a 3.64% Fed Funds rate. The 30-day AA nonfinancial rate of 3.63% actually sits 1 basis point below the Fed Funds target, signaling efficient market pricing. Funding costs remain predictable for top-tier issuers, as the 90-day AA financial rate is only slightly higher at 3.66%. This flat term structure suggests that market participants do not anticipate significant near-term volatility in interest rate policy. Consequently, the cost of carry for short-term corporate debt remains manageable.

Credit Spreads

The credit spread between A2/P2 and AA nonfinancial paper currently stands at 22 basis points, which is slightly below the historical median of 24 basis points. This narrow spread indicates that investors are not demanding a significant premium for taking on lower-tier credit risk. At the 43rd percentile of historical observations, the current spread suggests a lack of systemic stress in the credit markets. There is little evidence of credit tiering, where investors flee to the highest quality assets. This environment typically supports continued corporate investment and operational liquidity.

Credit Spread Trend

Historical Context

From a historical perspective, the current 22-basis-point spread aligns with periods of market stability and moderate growth. Similar spread levels in 2025, such as those seen in April and June, were followed by robust three-month S&P 500 returns of 11.6% and 5.9%, respectively. Historically, when spreads are at these levels, the S&P 500 has a 75% probability of being higher six months later, with a median return of 9.1%. While the February 2025 parallel saw a sharp decline, the broader data set suggests that current funding conditions are a tailwind for equities. Investors should view these levels as a sign of normalized credit functioning.

Sector Breakdown

Financial commercial paper continues to dominate the market, accounting for $608.9 billion or 43% of the total outstanding. Nonfinancial paper saw the largest weekly growth, rising by $6.1 billion to reach $347.8 billion. Asset-backed commercial paper (ABCP) remains a significant component at $446.1 billion, representing 32% of the market and providing essential liquidity for securitized assets.

Funding-Sensitive Stocks

Stable commercial paper conditions are particularly beneficial for large-cap banks and asset managers that rely on short-term funding markets for daily operations. With spreads near historical medians, financial institutions can manage their cost of funds effectively, supporting net interest margins. Corporate issuers in the nonfinancial sector also benefit from low-cost working capital, which can protect earnings per share during periods of broader market volatility. However, the recent 1.15% drop in the Nasdaq suggests that while funding is cheap, equity sentiment is currently decoupled from credit stability. Investors should watch for any widening in A2/P2 spreads as a potential early warning sign for these sensitive sectors.

Market Implications

The current environment suggests that money market funds remain well-supplied with high-quality paper, maintaining the flow of credit to the broader economy. Because CP rates are trading near T-bill levels, there is little evidence of a flight to quality that would typically drive down government yields relative to private credit. Banks are likely finding it easy to roll over short-term obligations, reducing the risk of a liquidity crunch. This stability in the plumbing of the financial system provides a cushion against the recent weakness seen in major equity indices. As long as the CP vs Fed Funds spread remains near zero, systemic liquidity risk appears low.