BlackRock posted a new publication entitled, "The BlackRock Advantage: Cash Management Solutions for Institutions." The piece explains, "Over multiple interest rate cycles and varying market conditions, BlackRock has managed cash portfolios for corporations, banks, foundations, insurance companies and public funds. Today, we are one of the largest cash management providers in the world. As a leader in this asset class, BlackRock has U.S. $403.6 billion in global liquidity assets across multiple currencies. With one of the most experienced teams in the industry, BlackRock is able to offer clients an investment approach that has been tested through time and a variety of solutions designed to meet the needs of today's cash investor." We excerpt from this below, and we also review Federated's new "Month in Cash" and a Citi update on Treasury supply.

BlackRock writes, "A broad range of products and strategies BlackRock considers cash management a unique investment discipline requiring a distinct skill set for effective management. While our investment strategy is conservative by nature, we strive to deliver competitive, consistent returns over time."

On "Money market funds," they say, "Our liquidity funds are specifically designed to meet the cash management needs of institutional investors. They satisfy the most conservative investment policies by consistently focusing on high-quality investments and providing same-day liquidity with competitive yields. Our U.S. products include both taxable and tax exempt money market funds, all of which comply with Rule 2a-7 requirements."

Regarding "Separate accounts," BlackRock comments, "We believe separate account strategies should be as unique as our clients themselves. Together, we work with our separate account clients to build portfolios that are designed to meet their company's objectives. We consider our client's investment goals, guidelines, risk tolerance, currency requirements and cash flow needs. Clients select us not only for our expertise and flexibility, but also for our creativity in tackling business challenges."

Finally, they add, "For clients looking beyond money market funds, we have the breadth and depth of BlackRock to offer. We have strategies for investing core and strategic cash assets through both commingled vehicles and separate accounts. We offer these solutions through many types of investment products. We offer a range of solutions in multiple currencies, available to qualified investors."

In Federated Investors' latest "Month in Cash: Likelihood of 3 hikes fading," Money Market CIO Deborah Cunningham writes, "The dots may have just run into reality. That's our take on the Federal Reserve's economic projections released at December 2016's Federal Open Market Committee meeting. The dot plot implied the Fed could be compelled to hike the target federal funds rate three times this year. We have taken a more conservative stance, still expecting only two moves, in March and September, with a third only as a possibility in December."

She continues, "It's all well and good that the dots showed policymakers optimistic about how the U.S. economy will fare this year. Chair Janet Yellen and other officials' rhetoric also points in that direction. Cash managers such as us would certainly love for the positive momentum to translate into wage gains and increased prices that could push inflation to the Fed's 2% inflation target, and provide a bump in yield in the process. But we see enough uncertainty in the economic and political spheres to question that this will happen."

Federated adds, "Simply put, economic statistics have not been bad but they have not been great, either.... On the other hand, inflation does appear to be picking up a bit. The consumer price index (CPI) is squarely above 2% at this point, the producer price index (PPI) is approaching 2% and the personal consumption expenditures index (PCE) -- data Yellen is said to pay particular attention to -- now hovers near that mark. Increasing inflation isn't bad, as long as it is orderly and is accompanied by measured gross domestic product (GDP) growth. But we are not convinced we are going to see enough to trigger a third move, and, again, economic data has been mixed lately."

They also write, "Then you have the political wild cards. While these may not have a huge impact economically, the more that people and business leaders get caught up in expecting the unexpected, the less likely they are going to reach in terms of investing or planning for the future. You can see that easily enough in the stock market, which hit great heights last week but has tanked given the past weekend's crisis around President Trump's executive order on immigration. In fact, what happened has clarified to us that the next four years are not going to be 100% rosy.... It is more of a balanced picture now, which solidifies our conviction that the Fed will undertake only two moves and not necessarily three in 2017."

Next, Citi's Steve Kang published, "Cash management bills to the rescue." It states, "The Treasury announced issuance of Cash Management Bills to engineer $23bn in cash balances by March 15, while ensuring high cash balance levels the days prior. Further supply of CMBs would limit richening in bill-OIS spreads going forward. We also discuss opportunities in the bills market past the debt ceiling reinstatement."

The "Short-End Notes" explains, "From the Q1 refunding announcement this week, our take ... was that (1) the Treasury is expecting higher deficits for Q1 than us (more on this later) and (2) CMBs are still likely to be issued despite their absence in TBAC projections, as it is a way to meet two goals at once – ensuring high cash balance/liquidity going into the March 15 deadline while honoring the $23bn cash balance. The cash balance limit is for the closing balance of March 15, therefore CMBs maturing on March 15 followed by another CMB issuance on March 16 would ensure a high cash balance on other dates, while mechanically meeting the cash target on closing of March 15.... Indeed, this seems like that is what they intend to do. The Treasury announced a $50bn CMB auction for next Tuesday, to mature on March 15."

The update adds, "Depending on how the auction goes, another round of CMB issuance maturing on March 15 cannot be ruled out. At the time of this report, when-issued CMB was trading at 49bp, trading 5bp at a discount to Mar 16 bill at 44bp. CMBs tend to offer concessions vs regulars and are therefore more expansive from the Treasury's perspective. However, it seems likely to us that keeping cash balance levels (their intended minimum balance is $150bn) seems to have taken a priority. We penciled in another $50bn CMB to be issued as 1M bill size is cut in mid-Feb."

Email This Article




Use a comma or a semicolon to separate

captcha image