A snapshot of what’s on International Treasurer’s radar screen this week. 

This week’s International Treasurer editorial meeting yielded several topics that we will explore in the coming weeks. These included a look at where the money is going now that TAG (transaction account guarantee) program has ended. Also up for further review is the growing trend of companies moving further out the yield curve; also, at look at how companies are increasingly considering using options.

Life after TAG.
With TAG over, markets haven’t seen the flood of funds flowing from bank accounts to other assets but there have been surges here and there. According to the Investment Company Institute, bank deposits “remain significantly higher than a year ago—more than $700 billion higher—while money market fund assets are just $17 billion above their January 2012 level. Meanwhile, MMFs haven’t seen the expected surge in cash in January related to the end of TAG.

Bankers also report the deposit runoff has not been large, many an earnings call transcript mentioned TAG’s end. Citi for one said it saw “an expected decline in deposits during the fourth quarter, reflecting the runoff of episodic deposits which came in at the end of the third quarter as well as the expiration of the … TAG program.” State Street said pretty much the same thing. In its earnings call, the money manager said it saw approximately $7 billion of deposits leaving its balance sheet since December 31, 2012 expiration. “Given the expiration of TAG and absent any significant US debt ceiling impacts, we expect to invest the remaining customer deposits in either highly liquid money market-type assets,” State Street said.

So will the money stay as is in 2013? We’ll find out.

Longer-dated Bonds.
Although cash is mostly staying put – in bank accounts or MMFs — or moving slowly from one area to another, the cash that is moving is in some cases moving to longer-dated treasuries. That’s companies are looking to pick yield and are apparently feeling more confident. As such, they moving money out of MMFs – which as of 2010 now hold high-quality short-term paper – and into longer-dated bonds.

There is also a report in the Wall Street Journal today discussing how cash managers are putting more cash in to commercial paper as they continue the quest for yield.

Options Premium.
Traditionally, most corporate treasurers would avoid using options for cash-flow hedging because they were not usually granted a budget for options premium. But now with coming regulations and more stringent accounting demands, options are looking like a better, well, option, for lack of a better word. Many companies aren’t given an options premium budget so are never able to use them; or if they do use them, they use zero cost collars.