commercial paper

Commercial paper is a type of short-term, unsecured promissory note typically issued by well-established corporations. These notes are sold primarily to businesses, insurance companies, pension funds, and banks, with maturities ranging from two to six months.1

The rates for prime commercial paper are generally slightly lower than those for prime business loans. A key limitation of the commercial paper market is that its funding relies on the excess liquidity of corporations, and dealings can be impersonal compared to bank relationships. Commercial paper arises from commercial transactions and can be sold as investments. Commercial banks play a central role in money markets, acting as both suppliers and users of funds.123