Short-selling info firm, DataExplorers, reports on Tuesday that the amount of commercial paper (CP) and certificates of deposit (CDs) â otherwise known as ânear cashâ instruments â held by custodians has quadrupled over the past six months: The thing about commercial paper and CDs is that theyâre relatively safe to own, but typically pay no or very little interest â in other words, theyâre not the highest-yielding of assets. Though they are better than some other things. Over to DataExplorers: So it is interesting to note that Custodians have seen an increase in their CP holdings over the last 6 months from $4bn to $12bn. It was last this high in Q1 2009 when confidence was extremely low. One guesses that the reason is the incredibly low yield from holding cash or T‐Bills. If you are a large asset manager and a transition in your portfolio results in a large amount of cash being held for a short period, what do you do if you want a very safe asset that pays some form of yield? The present answer seems to be CP. But, during the second half of last year, inventory in commercial paper was declining. This was presumably because the markets were strongly rebounding and many opportunities to house cash existed. That CP inventory is increasing again implies that the same opportunities no longer exist â interest rates are no different to this time last year when CP was declining so it canât be merely due to the low interest rate environment. However, commercial paper is not as safe as cash, especially since the Fed stopped its financing (guaranteeing) in February this year. Yet, the cessation of this quasi guarantee has not stopped the increase in popularity of commercial paper. One to watch. http://ftalphaville.ft.com/blog/2010/08/31/330076/the-near-cash-the-near-cash/