1 min readAbstract For institutional cash investors unsure of separately managed accounts in a rising interest rate environment, our scenario analysis suggests that a laddered portfolio of agency and corporate securities with a modest WAM could outperform the government money market fund proxy with negligible unrealized loss concerns in a rising rate environment. Both agency and corporate…
2 min readIntroduction It has been more than a decade since the last interest rate tightening cycle. As we dust off this report written more than ten years ago for corporate treasurers on how to weather a rising rate cycle, we are struck by how little we needed to revise its content despite a vastly different cash…
3 min readAs we approach the first rate hike cycle in almost a decade, it makes sense for cash investors to take stock of the state of the economy, as well as the Fed’s view of it. The pace at which the Fed raises interest rates will be important to anyone managing a cash portfolio, and close…
2 min readAbstract Lower oil prices and easier central bank policies outside the U.S. led the market to question the Fed’s timetable for raising interest rates. While both disinflationary and expansionary forces are present, financial markets appear to be focusing on the former, as the latter is still materializing. The net effect may allow the Fed to…
2 min readAbstract The three new trends we watch out for in 2015 include the start of an interest rate tightening cycle, consequences of worsening supply shortage, and resurging geopolitical uncertainties. We recommend moderate portfolio duration and a laddered portfolio structure. Other suitable tools may include callable securities, floating rate notes and bonds with putable and callable…
2 min readAbstract We elaborate on three key challenges for corporate cash investors in 2014: the emergence of new financial regulations, anticipation of a steeper yield curve, and proliferation of innovative products. As a number of financial regulations reach the stage of implementation, short-duration investors will start to feel the impact of regulatory initiatives. Even though higher…
2 min readAbstract We do not foresee a meaningful rise in short-term interest rates even as the Fed may begin tapering bond purchases. The fed funds rate, the key factor affecting short-term rates, likely will not start to rise prior to mid-2015. Investors should continue to look for opportunities further up the yield curve with separate account…
2 min readAbstract We have identified the acceleration of money market fund reform, the scarcity of eligible investments and the threat of negative yield as three challenges facing corporate treasury professionals in 2013. Our recommendation remains the same as found in previous research – consider a separately managed account as a defensive measure against regulatory uncertainty, supply…
3 min readAbstract The almost comical sounding term “Operation Twist” has been creeping into the financial media since last December as Federal Reserve officials and market commentators discussed innovative ways to revive the stagnant economy. This phrase became a household name on September 21st, when the Federal Open Market Committee (FOMC) decided to simultaneously buy $400 billion…
3 min readAbstract Treasury rates may remain at zero or negative levels for a prolonged period and additional banks may begin to charge “extraordinary deposits” fees, pushing depositors back into the money markets. It just may be a matter of time before many, if not most, treasurers are confronted with negative portfolio yield. Private and public sector…