The latest topics International Treasurer is investigating.
The end of a turbulent decade finds treasurers increasingly torn between desire to find better-yielding cash investments and their crisis-inspired caution. Some are considering buying longer-tenor securities, especially as much of the AAA rated paper at a year and under is snapped up by money market funds.
Meanwhile, a whole class of AAA rated securities—covered bonds—is on the verge of being downgraded by Standard & Poor’s due to a change in its rating methodology, making it even harder to find top-shelf investments.
All this means that one of the big challenges facing treasurers as the new decade opens is finding ways to keep their cash from being eroded by inflation while avoiding the next permutation of auction-rate securities, dodgy sovereigns, unsound structured products and their ilk.
But that’s not their only headache by far. Take foreign exchange. With volatilities in many FX cross-pairs double what they were prior to the crisis, treasuries with meaningful currency hedging programs face some rough seas. While it isn’t clear whether the vols will return to pre-crisis levels, the sharply reduced risk appetite across the financial services sector, nettlesome current account imbalances among the major global trading partners and deterioration of some of the Eurozone members’ economies could keep hedging expensive for some time.
In this environment, The NeuGroup has kicked of the second part of its World Class FX Management project, which will poll members of its FX Managers’ Peer Groups about topics related to hedge accounting and fair value. The results will complement the first half of the project (see “World-Class FX Management,” IT October 2009), which focused on best practices and processes.
Some of these issues will be previewed in International Treasurer’s January “Year Ahead” issue, in which we will also take a look back over the main concerns of the past decade, many of which fell off the radar screen as the financial crisis unfolded and survival became the top priority. With the worst of that upheaval apparently in the past, treasurers can now be forgiven for wishing for a truly boring 2010 in which to catch their breath.