Waking Up an Echo
Tags: FX algos, iTreasurer, March 2018, OpenLink, repatriation, Risk Management, software, supply chain finance, tax reform, UniCredit
No, we’re not talking Notre Dame football here (or an Amazon device!). This is an echo of another sort; one that involves corporate sales of US Treasuries and how they could echo US Federal Reserve sales of US Treasuries. And it all has to do with tax reform and cash repatriation, the theme which this month’s iTreasurer continues to explore. Also discussed are FX algos, software and tax reform, risk management, supply chain finance and treasurers helping boards manage risks.
First, page 1. The irony of the $3 trillion or so in so-called trapped cash is that about half of it is in US dollar-denominated assets, namely short-term US Treasuries. So selling those bills and bonds could have an impact on interest rates and, according to one observer, create an “echo taper.” This means the selling will happen concurrent with the US Federal Reserve’s project to unwind its balance sheet, possibly putting upward pressure on rates.
But it’s a little premature at this point as most companies, while perhaps chomping at the bit for the cash, are still working out what to do. In a NeuGroup poll of peer group members, 66% of respondents said they are still working out plans for repatriated cash, while 13% have plans ready to present to the board and 6% have plans ready to go.
In our Anticipated Exposures section on pages 4-5, we discuss the quality of corporate credit markets, where responsibility lies when there is fraud in a SWIFT payment, and how the UK plans to add supervisory fees on MMFs.
On page 6, in “FX Algo Benefits Being Realized,” we discuss the continued growth of algorithms in foreign currency trading. In a world where the cost of execution continues to increase, corporate foreign currency traders are constantly on the lookout for tools that provide more transparency and better performance, and algos have a lot to offer.
Continuing with our tax reform theme, our story on page 7, “US Tax Reform: Challenges, Opportunities and Solutions for MNCs and Corporate Treasury,” delves into the implications for how global MNCs allocate capital across the globe. With input from risk software company Openlink, we learn how reform will put treasury and tax departments—and the technology systems they rely on—in the spotlight as senior execs evaluate how to spend or invest the cash windfall some companies expect to enjoy in the years ahead.
In our peer group summary, we sit in on NeuGroup Corporate ERM Group’s conversation about putting risk management in step with strategy. This meeting cemented the belief that full integration of strategy and risk management should be a key objective for members. Some even argued that having two different terms is counterproductive, because it reinforces the separation of risk from strategy.
On page 15, UniCredit suggests ways to improve receivables programs, which in turn can help companies with working capital optimization. This area has become a key priority for corporate treasurers and provides multiple benefits for almost all transaction banking products and services.
Finally, on page 19, we discuss how global MNCs will face a multitude of risks this year and how treasury departments can help manage those risks.
For over 20 years, iTreasurer has delivered intelligence for treasurers. Based on exclusive access to senior treasury executives who are members of The NeuGroup Network of treasury peer groups, iTreasurer takes their real-world experience to produce articles, case studies and reports that are specifically meaningful to treasury best practice. www.iTreasurer.com.