It appears that the credit crunch, which has gripped financial markets since the middle of August, continues to abate.

In a research note issued today, National Bank Financial says that the U.S. market for commercial paper shows signs of stabilizing. “According to just-released data from the U.S. Federal Reserve, total commercial paper outstanding edged up for the third consecutive week on October 17. At this point, all of the weakness remains concentrated in the segment for asset-backed commercial paper,” it says.

“The amount of ABCP outstanding was actually down for the tenth consecutive week, for a cumulative decline of 25% from its peak of $1183 billion,” it adds. “Outside ABCP, the outstandings actually increased $12.3 billion, the best performance in five weeks. Despite the recent improvement, however, the outstanding of non-ABCP commercial paper is still off 7% from its peak.”

At the same time, for the second day in a row, the Bank of Canada didn’t have to inject liquidity into the Canadian market through its special purchase resale agreements. These interventions are designed to reinforce the target overnight rate.

On Monday, the Bank of Canada injected $780 million via SPRA, and that dropped to $591 million on Tuesday. Wednesday was the first time this month that it didn’t have to inject liquidity this way.