20 min readDOWNLOAD FULL REPORT Abstract As the post-recession credit cycle matures and a period of historically low interest rates ends, investors are paying increased attention to the rise of corporate leverage. Companies have borrowed heavily in the past decade to fund M&A activity and investor payouts. This has resulted in significant growth in BBB-rated debt for…
2 min readRemember CDO’s, those collateralized debt obligations at the center of the massive mortgage meltdown in 2008? These days, you can expect to start hearing about CLO’s, collateralized loan obligations, that are at the tip of a rapidly growing iceberg of leveraged corporate debt. The recent growth of CLO’s is only one of many warning signs…
2 min readEver since reforms inspired by the financial crisis required prime money market funds to float their net asset values, institutional cash investors have been searching for alternatives that will provide the same type of dollar-in, dollar-out liquidity, safety of principal and yield that the old prime funds offered. And now that the Fed’s interest-rate hikes…
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 readOne of the great lessons we learned from the 2008 financial crisis was that the world is not as safe as we often think. That’s as true today as it was then, even after extensive industry and regulatory efforts aimed at the financial system. Corporate cash investors are confronting a financial landscape that’s even more…
11 min readAbstract Experience has taught us that counterparties can fail with little warning. Counterparty risk management has become more challenging in recent decades due to concentrated exposures, complex financial instruments and evolving bank credit. Corporate and treasury organizations should manage this risk proactively, have an integrated risk policy across business lines, diversify risk by setting exposure…
2 min readIn the run-up to the 2008 financial crisis, asset-backed commercial paper (ABCP) programs were among the many investments tainted by the subprime mortgage meltdown. The crash precipitated a steady outflow from a total of $1.2 trillion in ABCP investments at their peak in late 2007 to $238 billion in October 2017. But in recent years,…
3 min readAbstract Debt limit negotiations often go down to the wire, generating headline risk and investor uneasiness. The yield on T-bills maturing around default date may be substantially higher than those maturing in neighboring months. The exponential growth in government money market funds since the 2016 regulatory reform increases contagion risk should shareholders and portfolio managers…
1 min readWho would have ever thought the debt ceiling limit would become a dinner-table topic? In the past, Congress routinely voted to approve higher limits on debt covering the spending it had already authorized, and hardly anyone noticed. But in 2011, the debt-ceiling vote became a political football, with authorization tied to contentious debates about limits…
1 min readRising interest rates may offer new opportunities for higher yields, but they also present institutional cash investors with fresh challenges. Ultra-conservative investment strategies no longer meet expectations for higher returns, so managers know they may need to move beyond a safe mix of Treasuries and FDIC-insured cash accounts. In an earlier era, their job would…