How do you optimise your interest rate result

  • Post
    Patrick Kunz
    We are suddenly in a higher interest environment again. So having idle cash or trapped cash has bigger opportunity cost.

    However, bank counterparties are also struggling looking at some big banks that have failed. So optimising interest result should not only be about the highest interest rate but also on counterparty risk.

    Happy to hear opinions here on how to balance risk vs reward. Or are secured deposits the way to go (repo’s) ?


    Treasury for champions
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    Benjamin Defays
    I find repos not the answer for treasurers who are looking for risk diversification, risk-adjusted returns and simplicity in operations. In my view it should be about the right balance between banking products (negotiate your current account remuneration condition, ask for saving account options, and also term deposit when you can lock in liquidity – and rate – for several weeks/months), and money market funds. The latter will offer highly liquid instruments, with rather decent returns and good risk diversification without treasurers needing to review underlying assets constantly. On top of this, technology is there and readily available to invest/divest easily with some interfacing with TMS. For daily operations this is the best I’ve seen so far, with relatively easy onboarding and accessible to multiple risk profiles. I envision MMF as being the best product also for the upcoming rate change that is pointing on the horizon (rate cuts for Q2 2024), where fund providers will play with the WAM to protect yield while bank products will likely suffer more from rate cuts.
    Benjamin Defays
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