In 1993, the last time interest rates cycled through a low phase, many corporate investors thought they had found the magic bullet that would generate adequate, if not impressive returns. The solution: load up on derivatives that in theory keep the return-on-investment machine churning. In the end, however, the strategy proved to be a career-ender for many, as flawed bets on exotic derivatives triggered significant losses and even threw a wealthy California county into bankruptcy.

Fast forward nearly 10 years. The picture is fairly similar: Aggressive rate-cutting by the Federal Reserve has once again all but eliminated meaningful yield on liquid investments, and again treasurers are looking for alternatives. This time, however, having been burned by the derivative debacle of the mid-1990s, smart is taking a back seat to safe, and finance executives have decided to park their money until Alan Greenspan finally decides it's time for rates to rise. That means sticking with short-maturity investments, protecting principal and waiting.

The inaction might defy convention, given treasurers' innate desire to put cash to work and at the best rates possible. But experts say sitting tight just might be the best response to the current rate climate. "Nobody wants to be exposed if something goes wrong," says Elyse Weiner, vice president and market manager for large corporate clients in the treasury services unit of J.P. Morgan Chase & Co.

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