Carfang on Corporate Cash in Q3
The Carfang Group posted a news release, "Corporate Cash Falls $128B in Third Quarter to $3.83T," which tells us, "Corporations in the U.S. added $1.02 trillion or 36.1% to their cash holdings thus far in 2020 according to The Carfang Group analysis of recent Federal Reserve data. For the third quarter, cash is down $128B or 3.2% and now stands at $3.83T. According to Anthony J. Carfang, Managing Director at The Carfang Group, 'Corporate cash stabilized at historically high levels during the third quarter. Following a tumultuous first half in which the Covid pandemic led to a global flight to liquidity. Central banks intervened. Corporate cash soared.'" The release tells us, "The Fed's balance sheet grew from $4.1T to $7.0T during the first nine months of 2020 but was flat during the third quarter. Bank reserves which grew from $1.6T to $3.0T in the first half, dropped by $200B during the third quarter. As a result of these factors, corporate treasurers substantially increased their cash holdings. All major cash categories increased significantly this year. Cash + checkable deposits grew by $472B, time deposits by $69B and money funds grew by $369B. Corporate cash holdings were 18% of US GDP, 3X the level of the early 1990s. During the second quarter cash levels soared as US GDP plunged, exceeding 20% of GDP. The third quarter GCP rebound, combined with the drop in corporate cash brought the ratio down to 18%. There had been a three-decade long upward trend in this ratio, but the current leap is well above that trendline. As this is unprecedented, the macroeconomic effects remain to be seen. Corporate holdings of checkable deposits + currency grew 37% YTD and time deposits grew by 35%. However, their holdings of money market funds jumped by 66%. Checkable deposits and currency remained at 45% of corporate cash, after increasing from 35% following the SEC's tighter rules on money market funds." It adds, "Time deposits now account for 6.9% of corporate cash, dipping toward the lower end of its recent historical range. This is likely due to the low rates resulting from the pandemic-related aggressive Federal Reserve monetary policies. Money funds, at 24% corporate cash, pulled back slightly during the quarter, but still remain near their highest level since mid-2016 when the SEC instituted new regulations. That's still less than half the 59% level of December 2008." (See also our Crane Data News article, "Fed Flow of Funds Shows Households, Businesses Decreased MMFs in Q3.") In other news, a press release entitled, "Bandwidth Wins Treasury Award for API Integration of ICD Portal, Tovata Platform," explains, "Bandwidth Inc., a cloud-based communications platform-as-a-service company, won a 2021 Alexander Hamilton Award for transforming its treasury organization with an API integration launched earlier this year between ICD, an independent portal provider of money market funds and other short-term investments, and Trovata, a leader in automating cash reporting and forecasting through wholesale, multi-bank API data aggregation. The winning project created a seamless workflow for cash forecasting, short-term investments and reporting."
