What is "commercial paper"

Commercial \Com*mer"cial\, a. [Cf. F. commercial.] Of or pertaining to commerce; carrying on or occupied with commerce or trade; mercantile; as, commercial advantages; commercial relations. ``Princely commercial houses.''
--Macaulay.

Commercial college, a school for giving instruction in commercial knowledge and business.

Commercial law. See under Law.

Commercial note paper, a small size of writing paper, usually about 5 by 71/2 or 8 inches.

Commercial paper, negotiable paper given in due course of business. It includes bills of exchange, promissory notes, bank checks, etc.

Commercial traveler, an agent of a wholesale house who travels from town to town to solicit orders.

Syn: See Mercantile.

n. (context finance English) A negotiable instrument with short maturity.

n. an unsecured and unregistered short-term obligation issued by an institutional borrower to investors who have temporarily idle cash

Commercial paper, in the global financial market, is an unsecured promissory note with a fixed maturity of no more than 270 days.

Commercial paper is a money-market security issued (sold) by large corporations to obtain funds to meet short-term debt obligations (for example, payroll), and is backed only by an issuing bank or company promise to pay the face amount on the maturity date specified on the note. Since it is not backed by collateral, only firms with excellent credit ratings from a recognized credit rating agency will be able to sell their commercial paper at a reasonable price. Commercial paper is usually sold at a discount from face value, and generally carries lower interest repayment rates than bonds due to the shorter maturities of commercial paper. Typically, the longer the maturity on a note, the higher the interest rate the issuing institution pays. Interest rates fluctuate with market conditions, but are typically lower than banks' rates.

Commercial paper – though a short-term obligation – is issued as part of a continuous rolling program, which is either a number of years long (as in Europe), or open-ended (as in the U.S.).