Commercial Papers are short-term debt financing securities (no longer than 270 days in tenor) consisting of unsecured and discounted promissory notes issued by large corporations with good credit ratings, which can be readily traded. Due to their relatively short maturity period, commercial papers are referred to as low-risk investments, offering competitive returns to investors in compensation for the issuer’s credit risk.
- Liquidity – Government agencies and large companies regularly use commercial paper to fill in gaps in their cash flow.
- Return on Investment – Commercial paper offers a return on investment for buyers without requiring a long-term commitment. This makes it a viable option for institutional investors such as mutual funds and retirement plans that may not be able to tie up their funds for a long period of time
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