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…
2 min readI tend to liken the liquidity crisis to a hurricane that has hit the financial industry. Bear Stearns was swept away during the worst of the storm and now, as the weather subsides a bit, some treasurers are beginning to emerge from their shelters to assess the damage; what held fast and what may never…
2 min readAside from our own clients, in 17 years of helping guide Treasurers through the cash investment markets, I have never seen the corporate landscape littered with more casualties than today. Of all of the companies holding auction rate securities (ARS) today, an estimated 70% are experiencing regular auction failures and severe liquidity issues. In some…
2 min readFor cash investors, there exists a delicate and sometimes frustrating balance between deciding to stretch for those additional 10 basis points in yield and the urge to recoil to treasuries when isolated liquidity issues arise. To make wholesale judgments of any asset class or investment sector can result in unfounded generalizations that are rarely based…
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….
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…
2 min readExecutive Summary In the past year or so, LBO minefields started to appear in the “safe and sound” investment-grade credit landscape filled with A and AA-rated names. About 27% of the A-rated corporate index may be buyout targets. The LBO of Sallie Mae brings takeover risk to the “safe haven” financial sector. All of the…
2 min readWhen the obscurely named ABX.HE.BBB-.06-1 crawled from Wall Street trading computers into millions of living rooms through the national media last February, a system meltdown was fast approaching. The ABX isn’t an Internet worm; it is a specimen of “asset-backed credit default swaps,” or a quasi insurance policy on borderline investment-grade bonds repackaged from subprime…
2 min readExecutive Summary The recent SEC investigation into the auction rate securities market found “industry-wide” violations by 15 major brokerage firms of the Securities Act of 1933. We think that the violations uncovered by the SEC lend evidence to the opinion that the auction rate securities (ARS) market did not have the competitive bidding element. We…
2 min readExecutive Summary Since the introduction of the first fund in 1972, institutional money market funds have gained a well deserved position in most corporate cash portfolios, thanks to their safety, constant share price, liquidity, and competitive yield. But money market fund investing is not risk-free. In the last 15 years, at least one institutional fund…