Hello all, I work in the treasury department of a large corporate and I am curious as to why there is such a big difference between the short-term investment rates offered to corporate accounts and personal retail accounts. For investments with a similar term i am seeing at least a 50bps spread across all products. If you any of you can shine some light on this it would be much appreciated. Thanks KS112
1,000,000 x 0.0001 = 100 1,000 x 0.0050 = 5 Less moola for smaller accounts
storko Wrote: ------------------------------------------------------- > 1,000,000 x 0.0001 = 100 > 1,000 x 0.0050 = 5 > > Less moola for smaller accounts +1
umm I don’t think I am following. If a corporate client investments 1MM it would be the same as a rich person investing 1MM so why would the corporate client get dinged on his ROI?
I work in corp treasury… We manage a couple B and the minimum we’d ever put anywhere would be about $30M, which makes the above logic sound… It definitely has to do with scale.
I like to call it a “loyalty premium.” The Corporate accounts are much more likely to pull the funds and move them to another institution or investment product than the retail clients are. Another name for our corporate accounts is “hot money.” It’ll walk on a 5 bps difference with no chance to match the rate to keep the funds, while retail clients value the relationship with the FI more and will most often give that chance to match to keep the money there. For that reason we give better pricing to retail clients over corporate clients, except those corp clients that have shown an interest in building a solid relationship with our FI.
Having worked on a money markets desk. Agreed, one news release by S&P, or one bad move by the investment banking team. All of a sudden a corporate client who usually puts 200mm O/N for past 6months or 2week BA. Has decided they have a change of heart. Btw, I always thought the corporate treasury team has the power. I am sure if you lock-in money for a year, the bankers will more than kindly give you a nice rate. Then again Bernanke may start raising those rates rather quick, making a long-term deposit, CP, BA very risky for the corporate side.
Thanks for the feedback guys! I don’t think the scale theory applies since corporates usually invests much larger amounts of cash and they are getting dinged compared to retail clients. I have heard the so called loyalty premium or “sticky money” as one banker I talked to when comparing retail accounts to corporate accounts. I had originally thought it had to do with how banks match up liability, for example with the returns for retail clients tied to mortgage rates and returns for corporate clients tied to credit facility lending rates. Still right now in Canada 3month BA’s are going for around 28 bps on the corporate side but fully liquid savings accounts for retail clients yield as high as 1%, thats a huge difference. fxguy1234, what kind of money market instruments other then commercial paper are giving you guys the highest yield right now? Thanks again everyone KS
We’re getting shafted in everything… rates are pitiful right now…
How do you like treasury? What’s your role?
It’s awesome… Senior Analyst… I manage FX and some other things. Get to see a lot of different things (debt, swaps, options, forwards, issue / buy back stock)… Got this job right out of college but trying to make it to the sell side on either the FX desk or some other sort of client facing role…
Cool, I’m considering adding a treasury role to the list of possible next jobs. Seem like it could be fairly interesting, decent money, and pretty good hours from what I’ve heard.
are you in Canada or U.S.? I am struggling to find any thing short-term over 1% right now in Canada.
Yea I would look at it… 40 hours a week has been good but I’m young and wouldn’t mind working longer/harder for more pay and a nice bonus… The only risk with Treasury is that you spend more of your time doing what I call rear view mirror stuff (accounting, compliance) rather than windshield stuff (trading, analyzing, forecasting). After awhile you get pingeholed into the corporate finance “accounting type”, and it is hard to break that stigma to move into other types of roles. I would love to come back to Treasury at the end of my career and be the Treasurer or a F500 company. Talk about a sweet job, banks bend over backwards for your business, definitley a lot of perks… What role are you in currently artvandalay?
fxguy1234 Wrote: ------------------------------------------------------- > Yea I would look at it… 40 hours a week has been > good but I’m young and wouldn’t mind working > longer/harder for more pay and a nice bonus… > > The only risk with Treasury is that you spend more > of your time doing what I call rear view mirror > stuff (accounting, compliance) rather than > windshield stuff (trading, analyzing, > forecasting). After awhile you get pingeholed into > the corporate finance “accounting type”, and it is > hard to break that stigma to move into other types > of roles. > > I would love to come back to Treasury at the end > of my career and be the Treasurer or a F500 > company. Talk about a sweet job, banks bend over > backwards for your business, definitley a lot of > perks… > > What role are you in currently artvandalay? Yeah that’s the main thing, I’m not interested in the compliance/accounting aspect. I work in a corporate development role, which involves valuation, research, building models. I’m sure work life is similar, but like you said corp roles have limited upside unless you’re towards the top of the ladder. The issue with advancing within corporate development is you are usually held down by the person one level up from you since groups are small and usually fairly difficult to get into.
fx and art, how far are you guys into the CFA programe?
Level 3 candidate 2010
Level 3 candidate 2010
Maybe it’s a supply/demand constraint - there is simply more demand for these products (these clients are less inclined to use substitutes like bonds, commercial paper, or other alternative investments that individuals will use so rates must be higher for them?) so firms receive lower rates? I’m not sure why, but it certainly is the case.
Just a note, on backwards vs forewards thing, it’ll depend on your treasury department and how big it is. I have swarms of accountants that process all my trades/other treasury stuff. I don’t even have access to the GL records. I do spend some time on compliance reports for the lenders, but majority of the time is spent on forward looking stuff I would say…