The cost of borrowing in the commercial paper market hit a six-year high yesterday, as Europe's largest off-balance sheet vehicle chose to draw on its liquidity lines, rather than refinance its debt in the open market.

HBOS, the UK's largest mortgage lender, said it would repay maturing debt of its asset-backed commercial paper conduit, Grampian Funding, until pricing of the debt improved. Grampian is the largest asset-backed commercial paper conduit with $35bn (€26bn) in assets, according to Moody's.