2 min readThe Aftermath of a Crisis The credit market crunch that started in August 2007 has had a widespread impact on the treasury community’s liquidity management practices. Unlike in any previous market downturns, this credit market crisis started with a popular cash investment vehicle, asset-backed commercial paper, and continued with a system-wide shutdown of another, auction…
2 min readNow into our 18th year of working with treasury managers across the country, it’s as clear as ever that managing risk remains one of the least understood and most challenging areas of corporate cash management. The treasury landscape is littered with painful examples of write-downs from highly rated securities whose risk was miscalculated, misunderstood, or…
3 min readExecutive Summary Prior to the recent credit crisis, strong criticism of money market funds taking on too much risk could easily have been dismissed as fear mongering. With strong (but now dubious) triple-A credit ratings, constant $1 per share prices, daily liquidity, strong brand recognition, and deep-pocketed parents, what was not to like about money…
3 min readExecutive Summary From administering aggressive interest rate cuts to providing longer-term liquidity to financial firms; from accepting non-traditional asset collateral to assisting the Bear Stearns takeover by JPMorgan Chase; this Federal Reserve is unlike any we have seen in recent history. By throwing out the rulebook of central banking, some pundits say the Fed sets…
3 min readIntroduction In its most basic form, investing is all about understanding and managing risk. For fixed income securities, it’s more about managing credit and interest rate risk. And, understanding credit is of particular importance for corporate cash investors whose primary concerns are principal stability and liquidity, while attractive yield potential is often a secondary concern….
1 min readExecutive Summary The auction market relies heavily on investor confidence. Once certain bonds were perceived to be troubled, similar securities, even those with well run programs, may see their auctions at risk. The scenario of a bond ultimately curing itself with a successful auction is unlikely. It is unrealistic to assume that dealers will eventually…
2 min readExecutive Summary Our five core themes for the risk-averse, short-duration, and buy-and-hold corporate cash investor are: Economy and Interest Rates: Looming Recession Risk and Lower Rates Corporate Credit: Battered and Cheapened, but Not Down and Out Market Technical Factors: A Wary Market Short on Liquidity Asset-backed Securities (ABS): Show Me the Collateral Return Expectations: A…
2 min readAmidst the financial rubble brought on by the subprime crisis, might there be havens for cash (aside from under the mattress) for the corporate treasury investor? We think so. First, let’s review what led to the flurry of recent negative headlines. Since last August, there have been large write-downs by financial firms with credit exposure…
2 min readExecutive Summary The concurrent use of commingled and separate accounts may help in optimizing corporate cash management. In corporate cash management, separate account management has a limited following – about 20% vs. 76% in money funds and 22% in other funds. Six Advantages of Separately Managed Accounts: Tailored Risk Management Transparency Higher Return Potential Free…
2 min readIn April 2007 increasing losses sustained by bonds with exposure to subprime mortgages became apparent. [See “The Subprime Flu,” April 2007] In the months that followed, this brought on a widespread credit contagion and took many investors by surprise. Among the hardest-hit areas was the short-term credit market that came to a screeching halt in…