The Canadian commercial paper market is likely to remain moribund for the rest of the year, says rating agency DBRS Limited.

In a report published Wednesday, DBRS says that the market is “not expected to show any prospect of growth until 2011 and beyond.”

The commercial paper market in Canada saw a decline of 8.3% in 2009, “as increased government issuance was more than offset by a significant reduction in corporate, banker’s acceptance and structured issuance,” says Kent Wideman, DBRS chief credit officer.

Both supply and demand factors affected issuance last year. “Overall, 2009 represented a transitional year for corporate commercial paper as the marketplace shifted from a recessionary environment back to more normal growth conditions,” the report says.

For the current year, DBRS expects the commercial paper market to decline by between 5% and 10% “as a reduction in government issuances drives aggregate volumes lower,” says Peter Schroeder, managing director of its’ rating committee.

“A modest decline in asset-backed commercial paper (ABCP) volume will also negatively affect total commercial paper volumes in 2010 as amortization of existing product continues to more than offset additional product,” he adds.

In 2010, DBRS also expects lower government and ABCP volumes will likely be partially mitigated by modest improvement in corporate volume as economic activity begins to improve.

IE