Bloomberg writes "Guggenheim Seeks to Reassure Clients of Commercial-​Paper Unit." They state, "A Guggenheim subsidiary sought to reassure investors that it remains a viable issuer of short-​term financing known as commercial paper as regulators and federal prosecutors continue to probe the company'​s founder Mark Walter. Guggenheim Treasury Services '​is not a target of the investigations and continues to operate business as usual,' the company said in a message to investors seen by Bloomberg. 'GTS has a 30-​year operating history, having issued and repaid over $​12 trillion of commercial paper.'" The piece explains, "Guggenheim'​s commercial paper issuers operate '​as bankruptcy-​remote entities, which are not owned by any of the targeted entities under investigation,' according to the Aug. 20 message. '​In the unlikely event that GTS does not perform its managerial duties,' the company said, it would appoint an independent agent to repay its obligations." Discussing commercial paper, Bloomberg adds, "Money‑​market funds were once the dominant buyers, but today account for only about 20% of the market, with the rest held by banks, corporates and other cash investors. Within that market, Guggenheim Treasury Services operates asset‑​backed commercial paper conduits -- structures that issue short‑​term notes backed by secured loans. Unlike during the financial crisis, a majority of such paper is now usually backed by repurchase agreements rather than pools of receivables. Such entities have long been used by major banks and finance companies to raise short‑​term funding."

A blog posted on "Linked In" by Capital Advisors Group titled, "Getting Under the Hood," tells us, "Tier-​2 commercial paper may offer a potential for additional yield. But realizing that opportunity requires looking beyond the rating to understand the underlying credit quality and assessing whether the incremental yield is appropriate given the additional risk. As money market reforms continue to influence cash investment strategies and drive more money toward Government and Treasury money market funds, A2/​P2 -- or Tier-​2 -- commercial paper may offer institutional investors an alternative investment option and potential for additional yield." They write, "At first glance, the opportunity may seem straightforward: take on somewhat more credit risk in exchange for additional yield. But the rating is only the starting point. Tier-​2 commercial paper continues to be a viable investment for cash portfolios and a possible alternative to MMF investments. However, the underlying business dynamics of issuers can vary considerably. Our focus is on corporate issuers rather than financial issuers within the A2/​P2 universe. We then evaluate these corporate issuers to identify those that we believe exhibit characteristics consistent with what we call '​Tier-​2 by rating, Tier-​1 by quality.'" The post adds, "​The additional yield only tells part of the story. The more important question is what'​s driving it -- and whether the underlying credit fundamentals and business dynamics support the pickup in yield."

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