Cautious Optimism On The Credit Front

Now for some good news…. Indicators of a recovering credit and liquidity environment have emerged significantly over the last month.

The TED spread (3-Moth LIBOR vs. Treasuries) continued to narrow to 79 basis points, while a continued sell-off in treasuries contributed to a stronger upward bias in the Fed Funds futures contract. These indications, along with a number of capital raises in the banking and brokerage worlds, give concrete signals that the stresses and illiquidity challenges the market went through in the first quarter are diminishing.

With these developments, it appears an environment is beginning to emerge where one may start to consider taking advantage of the latitude most corporate investment policies provide. As we near this potential shift from the most conservative corners of investment policies, the opportunity arises to learn from the past nine months, and to modify, if necessary, treasury practices that have recently proved problematic for many companies.

The recent credit environment has afforded Capital Advisors Group a view into a wide variety of treasury operations in an independent consultant capacity, and has provided us visibility into the best and worst investment practices of some large corporate treasury groups. From that vantage point, this month, we would like to share with you several common short falls that we have seen.

As the opportunity to re-engage corporate treasury functions continues to emerge, now is the time to identify deficiencies, fix what may have broken, and reinforce what worked well. We welcome a more positive credit environment and the opportunity to bring the offense back on the field again after a year of playing strong defense.

Best Regards,

Ben Campbell
President & CEO