CFO: Corporate Cash Finds Yield
CFO magazine writes "Corporate Cash Finally Finds Some Yield." The article tells us, "For the first time in a while, there's enough yield in short-term cash investing to make CFOs and treasurers notice. Relatively safe and liquid money market funds, Treasury bills, and other credit instruments have attractive rates again because of the Federal Reserve's interest rate hikes. Inflation, of course, has also made seeking some yield prudent -- cash idle on balance sheets becomes less valuable by the day." It comments, "While a company might be unable to fully offset increases in the costs of materials, labor, and energy use without taking on undue risk, treasury departments have realistic alternatives to parking cash in bank accounts. 'The Fed and global central banks have suppressed market-determined interest rates' for years, Jerry Klein, a managing director at Treasury Partners, told CFO. 'Now, as the Fed pulls the punch bowl ... our clients are very excited about the opportunity to earn significant interest income on cash balances.'" The article adds, "But treasurers can earn income apart from bank accounts without losing principal and staying relatively liquid in the event economic conditions worsen. Following are four tips for approaching short-term investments. 1. Money market funds are safe and liquid, but beware they have a downside. 'The presumed safe bet' is to leave excess cash balances in money market funds (MMFs) and short-maturity (less than three months) Treasury bills, Lance Pan, director of investment research & strategy at Capital Advisors Group, wrote in a market commentary. Money market fund assets have climbed from $4.47 trillion in April 2022 to $4.58 trillion as of October 5, according to the Investment Company Institute. Very few corporations still allocate cash to prime institutional MMFs due to the market's structural vulnerabilities. But Government and Treasury MMFs made up 14% of organizations' cash allocations in the most recent Association for Financial Professionals Liquidity Survey."
