So much for the job recovery.....

Commercial Paper Falls Most Ever as ConEd Sells Bonds
(Bloomberg) -- The U.S. commercial paper market, the cheapest source of corporate cash, is shrinking at a record pace, raising the cost of capital for borrowers from Consolidated Edison Inc. to Kellogg Co.

The market for company debt due within nine months has plunged 28 percent since April 8 to $1.1 trillion, its longest and deepest slump, Federal Reserve data show. Investor demand for all but top-rated commercial paper, or CP, evaporated after September’s collapse of the $62.5 billion Reserve Primary Fund sparked a run on money-market accounts, and as the recession sapped companies’ need for short-term credit to expand.

Proposals from the U.S. Securities and Exchange Commission in June may worsen the slump by restricting money-market funds, which hold 40 percent of the paper, to only top-rated debt. That would force more companies to sell bonds that may cost an extra 8 percentage points in interest, or $8 million a year for every $100 million borrowed.

“You’re not going to build that plant, you’re not going to expand, you’re not going to hire folks,” said Brian Kalish, a director at the Association for Financial Professionals, which represents 16,000 corporate treasurers, bankers and investors. “We’re creating this world of haves and have nots.”

Higher corporate interest costs may slow the economic recovery, Kalish said in an interview from his Bethesda, Maryland, office. The U.S. economy, after contracting 6.3 percent in the fourth quarter and 5.5 percent in the first, is forecast to start growing in the third, according to the median estimate of 72 economists surveyed by Bloomberg. Go here for full article...