Treasury Strategies Announces Corporate Liquidity Falls by $250 Billion - First Decline in a...

CHICAGO -- After nearly a decade of strong year-over-year growth, cash and short-term investments of non-financial U.S. companies fell by $250 billion or 5% in the 2nd half of 2007 according to a survey of clients conducted by consultants Treasury Strategies, Inc. Corporate liquidity rose steadily

"This is a sea change. Beneath the surface, there are much deeper changes in the marketplace," said David C. Robertson, Partner with Treasury Strategies. "We uncovered a massive rebalancing of corporate treasury portfolios. In all, over $1 trillion has been re-allocated by corporate treasurers. The portfolios have a much more conservative tilt. Even after the decline, corporate liquidity generally is strong. Cash remains near an all time high."

It is unclear how this $250 billion drop in corporate liquidity will impact the U.S. economy. However, the study showed that companies are taking a much more disciplined posture in their cash management. "We also see a trend among corporate treasurers to invest more in the technology and infrastructure supporting their cash management activities," Robertson added.

According to Anthony J. Carfang, another Treasury Strategies partner, "As a result of the recent market turmoil, corporate treasurers are taking a hard look at what securities are in their portfolios as well as their investment policies and practices. Many are no longer managing their short-term portfolios themselves. Rather, they are utilizing a mix of bank products and money funds."

Several problem securities including Auction Rate Securities (ARS) and enhanced cash mutual funds have received a lot of attention recently. "Only 1 of every 5 corporations was actually in problem securities," said Carfang. "While this group represents a small portion of the overall liquidity market, those who were in these securities will continue to have large portions of their portfolios frozen for the foreseeable future."

The survey of 135 non-financial U.S. corporations was conducted during February 2008. Treasury Strategies is now launching a similar survey among European corporations.

Treasury Strategies, Inc. is the leading Treasury consulting firm working with corporations and financial institutions. Our experience and thought leadership in treasury management, working capital management, liquidity and payments, combined with our comprehensive view of the market, rewards you with a unique perspective, unparalleled insights and actionable solutions.