US corporate cash managers switched their investment allocations in December ahead of the expiration of the unlimited guarantee on non-interest bearing bank accounts provided by the Federal Deposit Insurance Corporation (FDIC), according to data issued by Clearwater Analytics and reported in the
Wall Street Journal
A bill that proposed to extend the US Transactional Account Guarantee (TAG) programme for a further two years beyond 31 December 2012 was defeated last month in a
procedural vote in the Senate
Since the 2008 financial crisis, the TAG programme had guaranteed all non-interest deposit accounts at US banks and credit unions, above the FDIC’s normal US$250,000 limit for insurance on those accounts.
According to Clearwater, commercial paper had the biggest allocation increase among asset categories last month, growing by 0.86 percentage point to represent 9.87% of all assets, according to data from Clearwater Analytics. Certificates of Deposit (CDs) also grew to 2.5%, a 0.55 percentage point increase and its highest level in more than a year. Agency bonds declined by 1.11 percentage points to 14.91% of the total, their lowest level since June 2011, while Treasurys also fell by 0.62 percentage point to 24.35%.
Investment in corporate debt was little changed in December, increasing by only a .03 percentage point to 32.16%, the largest asset category in the data. Asset backed securities (ABS) and mortgage backed securities (MBS) also grew only modestly, to 3.89% and 3.7% respectively. Auction rate securities (ARS), which have steadily fallen since a high of 3.04% in February 2009, continued their decline to represent only 0.13% of corporate cash investments at the start of the year.
“Corporate investors moved away from expiring TAG accounts into the same money funds driving yields lower,” said Phil Bartlett, a senior portfolio manager at Clearwater. “In response to the lower yields, corporate cash investors continued to shift their exposure to CDs and commercial paper as replacements for agencies and Treasurys.”
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