Outstanding U.S. commercial paper maturing in 81 days or more jumped on Monday to more than six times its level from last week to $38.2 billion, according to Fed data released Tuesday.

The spike is the result of companies refinancing three-month loans from the Federal Reserve's Commercial Paper Funding Facility that mature this week.

Market participants expect a substantial portion of the loans to be refinanced through investors rather than the Fed, in a sign that the commercial paper market continues to heal.

"At least half of what is maturing will return to the market," said Deborah Cunningham, chief investment officer at Federated Investors in Pittsburgh. "The market is healthy and investors are looking to buy commercial paper."

The Fed will release data on Thursday, which will show whether its outstanding short-term loans to companies are declining.

The central bank has been supporting about a fifth of this $1.47 trillion market ever since it set up its commercial paper facility last year to lend directly to companies.

Approximately $125 billion worth of three-month financing provided through the Fed's program comes due this week, according to Wrightson ICAP estimates.

As of last week, the Fed held $242.43 billion of top-rated commercial paper, down from about $334 billion at the end of 2008.

The Fed offers higher lending rates than investors, in an effort to get issuers to interact directly in the market rather than leaning on the bank.

"Currently, market conditions have improved so dramatically that the Fed does not have to create an incentive for issuers to leave the program," said Chris Conetta, managing director and head of U.S. commercial paper trading at Barclays Capital in New York. Conetta pointed out there is "a core amount" of commercial paper that will remain in the Fed's program while issuers work on alternative funding solutions to become less reliant on the Fed.

Some companies have accomplished this by issuing longer-term debt under government-guaranteed programs. Others have left the commercial paper market altogether as the economy remains sluggish and their need for cash declines.

-By Anusha Shrivastava, Dow Jones Newswires; 201-938-2371; anusha.shrivastava@dowjones.com