commercial paper

Definition

Short-term unsecured promissory notes issued by corporations to fund immediate needs, typically maturing in under 270 days to avoid SEC registration. Think of it as corporate IOUs for companies with good enough credit that people actually accept them.

Example Usage

The Fortune 500 company funded its payroll by issuing $200 million in commercial paper at 4.5%, repayable in 90 days.

Origin

Money market terminology that evolved from merchant trade notes in the 19th century.

Fun Fact

The commercial paper market froze during the 2008 crisis when even blue-chip companies couldn't roll over their debt, forcing the Fed to create emergency lending facilities.

Source: Money markets and corporate treasury

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