On October 7, the Federal Reserve Board announced the creation of the Commercial Paper Funding Facility (CPFF). The CPFF is designed to provide much-needed liquidity to the term funding market via a special purpose vehicle (SPV) that will purchase three-month unsecured and asset-backed commercial paper directly from U.S. issuers (including U.S. issuers with a foreign parent). The Federal Reserve will commit to providingfinancing to the SPV at the target federal funds rate and will be secured by all of the assets of the SPV and in the case of unsecured paper, by the retention of up-front fees paid by the issuers or other forms of security acceptable to the Federal Reserve.

The Federal Reserve anticipates that the CPFF will eliminate much of the risk that eligible issuers will not be able to repay investors by rolling over their maturing commercial paper obligations, encouraging investor demand and thus lowering commercial paper rates, and enhancing the ability of financial intermediaries to accommodate the credit needs of businesses.