Treasury investors are used to dealing with an inverted yield curve, but on deposits? At today’s overly liquid banks, the more you deposit, the lower your return may be. It could even be explicitly negative. The retail rates banks offer consumers top wholesale rates, which has some large cash investors buying consumer products. “It’s a remarkable time for the cash industry,” observes Eric Lansky, director of StoneCastle Cash Management, a New York-based registered investment adviser.
Corporate cash now totals more than $6 trillion, notes Mike Gallanis, a partner at Treasury Strategies, which tracks cash. “The levels are unprecedented.”
Historically low returns still matter, and taking a mattress approach abdicates treasury responsibility, argues investment manager Lee Epstein, CEO of Decision Analytics in San Francisco. “Since 2008, corporate treasury investors seem frozen like deer in headlights, afraid to take any risk,” Epstein charges. “Boards, frightened by what happened then, clamped down unreasonably on cash investment, and that hasn’t changed.
“I talked recently to one assistant treasurer who was buying nothing but Treasury bills with less than 30 days to maturity and accepting a return of 1 to 2 basis points,” he adds. “For large amounts of cash, that is a tremendous sacrifice.”