Overnight AA Asset-Backed Commercial Paper Rate Chart Back at 2009 Levels

Click for larger view,  source: Federal Reserve
The Overnight AA asset-backed commercial paper rate moved from 0.13% on 7/8/2011 to 0.46% on 9/29/2011. Decent move, and it top ticked the market as well. I'm not sure what the exact catalyst was after July 8, but when looking back on my blog, the U.S was placed on credit watch negative, nations and banks in Europe were being downgraded, Italian and Spanish bond spreads to German bunds were breaking out, and the global economy was slowing. So, I'm assuming investors demanded an extra 33 basis points on overnight AA asset-backed commercial paper to compensate for the heightened risk. You can see that the rate is back at 2009 levels.

Here is how the commercial paper interest rate indexes are calculated.
"To calculate CP (commercial paper) interest rate indexes, the Federal Reserve Board uses DTCC's data for certain trades to estimate a relation between interest rates on the traded securities and their maturities. In this calculation, the trades represent sales of CP by dealers or direct issuers to investors (that is, the offer side) and are weighted according to the face value of the CP so that larger trades have a greater effect on the resulting index. With the relation between interest rates and maturities established, the reported interest rates represent the estimated interest rates for the specified maturities.

Interest rates calculated through the process described above are a statistical aggregation of numerous data reflecting many trades for different issuers, maturities, and so forth. Accordingly, the reported interest rates purport to reflect activity in certain segments of the market, but they may not equal interest rates for any specific trade. As with other statistical processes, this one is designed to minimize the difference between the interest rates at which actual trades occur and the estimated interest rates."

Read more about commercial paper and track the interactive chart here (federalreserve.gov).