A roundup of issues International Treasurer is investigating.
The bifurcation of the capital markets continues apace, at least as the loan and bond markets are concerned. The decision as to whether to refinance or wait, in particular, has diverged in that the loan market looks to be continuing to improve, while the bond market conditions may be near their ideal.
The tenors available in the loan market continue to extend, and pricing has come down significantly. It is now possible to get three- to four-year money; five-year loans are still rare but bankers expect them to reappear shortly. However, bankers say it is hard to imagine a better time to tap the capital markets. A happy confluence of historically low short-term rates, investor appetite and regulatory forbearance makes this a particularly attractive time to tap the markets.
Meanwhile, a topic of pressing concern for The NeuGroup’s Treasurers’ Group of Thirty, which met this week, was counterparty risk and how to manage it. In particular, the advantages of negotiating credit support annexes—despite the difficulty doing so—were top of mind. The issue is complicated by the need to negotiate separate agreements with each counterparty. While a standardized agreement may be ideal from treasury’s point of view, your counterparties will, most likely, be unwilling to accept such a solution, making this a six- to eight-month process if conditions are right.