6 min readIs an inverted yield curve still a reliable predictor of an impending recession? And will the recent flattening yield curve affect bank credit quality? Currently, with the narrowest spread between the 2-Year U.S. Treasury bill and the 10-Year U.S. Treasury note since the 2007 recession, both those questions are on the minds of treasury professionals…
2 min readIf you’re a cash investor waiting for bank deposit yields to catch up with the Fed’s interest rate hikes, don’t hold your breath. The so-called “deposit beta,” which measures how fast banks raise their rates as a percentage of the increase in the federal funds rate, has risen at a snail’s pace compared to previous…
9 min readAbstract Deposit rates are starting to increase as we move further into a rising rate environment. Banks still have not rewarded depositors sufficiently with a 21% average deposit beta, although some executives expressed moving it above 50%. The wait for higher rates continues unless depositors are willing to consider market-based instruments. There, several options exist…
3 min readThe Earnings Credit Rate (ECR) has been a successful tool used by banks to lure corporate depositors during the low interest rate environment, but shouldn’t be expected to keep pace with rising interest rates. Banks offer ECRs to offset bank transactional fees for non-interest bearing deposits accounts, effectively acting as a conduit to hard interest….
3 min readAbstract Treasury organizations maintain deposit relationships despite uninsured credit risk and lost yield opportunity. Earnings credit rates may become less competitive than market-based rates. Including separate accounts in the mix helps address both credit and yield objectives in institutional liquidity management. Introduction The search for liquidity management solutions reached a new level of significance when…
1 min readIntroduction Many corporate treasurers are keeping their cash in bank deposits, U.S. Treasuries and government money market funds as they assess the impact of ongoing reforms that are changing the risk and liquidity profiles of prime money funds. According to the 2016 Liquidity Risk Survey of 130 treasury professionals by Strategic Treasurer and Capital Advisors…
5 min readNew Liquidity/Risk Survey Identifies Opportunity Costs Associated with Bank Deposits and Government Securities Many corporate treasurers are keeping their cash in bank deposits, U.S. Treasuries and government money market funds as they assess the impact of ongoing reforms that are changing the risk and liquidity profiles of prime money funds. According to the 2016 Liquidity…
2 min readAbstract Bank deposits have always represented the main cash management vehicle for institutions. Growth in deposits and money market fund balances crisscrossed each other over recent decades. Recent financial regulations, notably the liquidity coverage ratio, net stable funding ratio and G-SIB capital surcharges, caused deposit dynamics to change, reducing banks’ appetite for non-operating deposits. We…
2 min readAbstract As Federal banking authorities work to implement rules to allow for the quick and efficient dissolution of too-big-to-fail banks, ratings once again are under assault, and most large U.S. banks could lose their access to the short-term markets toward the end of 2013. The anticipated negative rating moves will be the direct result of…
2 min readAbstract Global banking authorities’ moves to resolve systemically important financial institutions (SIFIs) may result in first losses being borne by bank creditors in the event of a failure. Under the new resolution authority, size no longer may be an indication of safety for bank credit. Instead, one should look to a bank’s fundamental business condition…