Transitioning from LIBOR: Explaining the cash fallback rates

14-09-2021 | treasuryXL | Refinitiv | Jacob Rank-Broadley

The LIBOR transition: We explain what fallback rates for the USD cash markets are and provide practical insights on how these rates can be used.


  1. Refinitiv USD IBOR Cash Fallbacks are designed to ensure existing USD LIBOR referencing products such as loans, bonds and securitisations can continue to operate post-USD LIBOR cessation.
  2. There are two versions of the Refinitiv USD IBOR Cash Fallbacks: those for consumer products and those for institutional products.
  3. Initially, market participants can use the prototype USD IBOR Cash Fallbacks to become more familiar with the rates and test technical connectivity.

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During my previous blog on fallbacks in April 2021, I outlined the importance of introducing robust fallback rates into the USD cash markets.

There is a substantial exposure of cash instruments that have no effective means to easily transition away from LIBOR upon its cessation. New LIBOR legislation signed into State of New York law reduces the adverse economic outcomes associated with the instruments by requiring them to use the Alternative Reference Rates Committee’s (ARRC) recommended fallback language.

In March, the ARRC announced Refinitiv as publisher of its fallback rates for cash products. Since then, Refinitiv has been working with the Federal Reserve and the ARRC to finalise the design of the USD IBOR Cash Fallbacks.

Refinitiv is committed to supporting you through the LIBOR transition with LIBOR Transition and Replacement Rate solutions

Fallback rate economically equivalent to USD LIBOR

The Refinitiv USD IBOR Cash Fallbacks provide the rates described in the ARRC’s recommended fallback language.

These are composed of two components: the adjusted Secured Overnight Financing Rate (SOFR) part measures the average SOFR rate for the relevant tenor. Added to this is a spread adjustment, which measures the difference between the USD LIBOR for each tenor and SOFR compounded in arrears for that tenor.

Adding these two components together gives an all-in fallback rate that is economically equivalent to USD LIBOR.

There are two version of the Refinitiv USD IBOR Cash Fallbacks: those for consumer products and those for institutional products. Both are published to five decimal places and include the adjusted SOFR rate, the spread adjustment and the all-in rate.

Watch: Refinitiv Perspectives LIVE – The LIBOR Transition: Risk-Free Term Rates

Consumer cash fallbacks

Refinitiv USD IBOR Consumer Cash Fallbacks are designed to ensure existing USD LIBOR referencing consumer cash products such as mortgages and student loans can continue to operate post-USD LIBOR cessation.

These rates are based upon compound SOFR in advance, which means the rate is known at the start of the interest period, plus the spread adjustment.

Prior to 1 July 2023, the spread adjustment will be calculated as the median difference between USD LIBOR and SOFR compound in arrears for the previous 10 working days, resulting in the spread adjustment changing on a daily basis.

This is an indicative rate, and while it should not be used as a reference rate in financial products, it is designed to aid familiarity with the USD IBOR Consumer Cash Fallbacks prior to adoption in July 2023.

Following 30 June 2024, the spread adjustment will be calculated as the median of the historical differences between USD LIBOR for each tenor and the compounded in arrears SOFR for that tenor over a five-year period prior to 5 March 2021.

For the period between 1 July 2023 and 30 June 2024, the spread adjustment will be calculated as the linear interpolation between the two rates outlined above.

A floored version of the consumer cash fallbacks is also available, meaning that if the average SOFR across all days in the tenor is below zero, then the all-in published fallback rate will be solely the corresponding spread adjustment.

Refinitiv USD IBOR Consumer Cash Fallbacks will be published in 1-month, 3-month and 6-month tenors.

Institutional cash fallbacks

Refinitiv USD IBOR Institutional Cash Fallbacks are designed to ensure existing USD LIBOR referencing commercial cash products such as bilateral business loans, floating rate notes, securitisations and syndicated loans can continue to operate post USD LIBOR cessation.

In order to account for different conventions in different markets, there are a number of different versions of the Refinitiv USD IBOR Institutional Cash Fallbacks. There are three different ways of capturing the average SOFR rate: SOFR compound in arrears, Simple SOFR in arrears and SOFR compound in advance.

Added to this is the spread adjustment, which is calculated as the median of the historical differences between USD LIBOR for each tenor and the compounded in arrears SOFR for that tenor over a five-year period prior to 5 March 2021.

Unlike Refinitiv USD IBOR Consumer Cash Fallbacks, there is no transition period. This means that the spread adjustment remains fixed for perpetuity.

Each of the SOFR compound in arrears and Daily Simple SOFR rates will be available in up to seven tenors in a variety of different forms in order to conform to convention in different markets.

The 3-, 5- and 10-day lookback without observation shift versions give counterparties more notice by applying the SOFR rate from three, five and ten business days prior to the rate publication date.

The 2-, 3- and 5-days lookback with an observation shift versions also give counterparties more notice by applying the SOFR rate from two, three and five business days prior to the publication date, but in contrast to a lookback without observation shift, it applies that rate for the number of calendar days associated with the rate two, three and five business days prior.

The 2- and 3-day lockout versions fix the SOFR rate for the last two and three days prior to publication.

The plain version has no lookback, observation shift, or lockout.

The SOFR compound in advance rates for institutional products will be available in 1-month, 3-month and 6-month tenors.

Navigating the LIBOR transition

What’s the next step?

Initially, market participants can use the prototype USD IBOR Cash Fallbacks to become more familiar with the rates and test technical connectivity.

Following the ARRC’s recent endorsement of Term SOFR, Refinitiv plans to supplement the initial prototype with a forward-looking term rate version in due course.

During the prototype phase, we anticipate changes to the methodology based on user feedback to ensure full alignment with industry standards prior to publication of the production rates.

Production rates for the institutional cash fallbacks should be available from autumn 2021, and for the consumer cash fallbacks they will be available from July 2023.

How to access the rates

Prototype rates are now available from the Refinitiv website and through Refinitiv products including Refinitiv® Eikon, Refinitiv Real-Time and Refinitiv® DataScope.

For more information on these rates, including the methodology and identifiers (RICs), please visit our Refinitiv USD IBOR Cash Fallbacks page.

Refinitiv is committed to supporting you through the LIBOR transition with LIBOR Transition and Replacement Rate solutions

 

 

Refinitiv Corporate Treasury Data Insights | July 2021

27-07-2021 | treasuryXL | Refinitiv |

Andrew Hollins, Director of Corporate Treasury Proposition at Refinitiv, brings you the July 2021 round-up of the latest Corporate Treasury Data Insights.


  1. The stability of the dynamic spread between USD LIBOR and its recommended replacement SOFR raises questions about whether corporate treasurers will gain much more benefit from credit sensitive rates over and above SOFR.
  2. Under pressure from inflation, what impact on financial markets could a move in the dollar index bring?
  3. Central banks, including the Bank of England and the European Central Bank, are exploring a central bank digital currency. What benefits would this bring the central banks?

Corporate Treasury Charts of the Month

Sources: USD LIBOR administered by ICE Benchmark Administration; SOFR administered by Federal Reserve Bank of New York

The dynamic spread between USD LIBOR and its recommended replacement SOFR mostly reflects the credit risk of large banks. This spread has remained stable at 13-14bps over the last few years and did not change materially during the COVID-19 related market volatility in H1 2020.

The stability of this spread, particularly during periods of stress, raises questions whether credit sensitive rates such as BSBY and Ameribor provide meaningful benefits over and above SOFR to corporate treasurers.

Tell me more

On 17 March 2021, the Alternative Reference Rates Committee (ARRC) announced it selected Refinitiv to publish its recommended fallback rates for cash products. Following extensive engagement, Refinitiv plans to launch prototype USD fallback rates in August 2021 and production rates in the autumn. Find out more about Refinitiv’s LIBOR Transition and Replacement Rate solutions.

LIBOR Transition Event: why does the USD cash market need fallback rates?

With the major banks expected to stop using USD LIBOR as a reference in the vast majority of new derivatives and cash products by the end of this year, the race is now on for market participants to accelerate their LIBOR transition programmes in order to ensure the ongoing and efficient functioning of financial markets.

In a recent webinar a panel of experts from Refinitiv, the LSTA, Wells Fargo and the U.S. Federal Reserve discuss the USD cash market and the need for fallback rates.

The Big Conversation: The two biggest risks for markets

Inflation may be the headline grabber at the moment, but it is the impact on bond yields and the U.S. dollar that really matter. If they don’t move, markets can tolerate higher inflation.

So far, bond yields have responded well to the inflation scare, but a move in either direction by the dollar could now be a problem. Discover analyst expectations for bond yields and the US dollar and assess the associated market risks.

U.S dollar index. Corporate Treasury Data Insights | July 2021

Data on the Data: the rise of central bank digital currency

Major central banks around the globe have taken steps towards identifying a framework for building a central bank digital currency (CBDC). A CBDC would be a new risk‑free digital form of currency issued by a central bank, which performs all the essential functions of money.

Major central banks around the globe, including the Bank of England and the European Central Bank (ECB), are exploring the common principles and key features for building a CBDC.

In this new episode of Refinitiv’s Data on the Data, Sachin Somani, Global Director of the Central Banking Customer Proposition at Refinitiv, outlines the desire for central banks to develop their own digital currency to complement their existing offerings, reduce the reliance on coins and notes, and compete with private coins in the crypto space.

 

Watch: The Rise of Central Bank Digital Currency – Data on the Data | Refinitiv

Refinitiv Corporate Treasury Newsbeat

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Refinitiv Corporate Treasury Data Insights | June 2021

06-07-2021 | treasuryXL | Refinitiv |

Andrew Hollins, Director of Corporate Treasury Proposition at Refinitiv, brings you the June 2021 round-up of the latest Corporate Treasury Data Insights.


  1. Issuance of non-U.S corporate USD denominated debt has increased, and is most pronounced in Japan and driven by M&A.
  2. Sign-up to learn more about the rise of digital treasury in India and watch a video to observe how crypto trends are evolving.
  3. Are we witnessing the start of a commodities supercycle? And watch a webinar to learn more about the impact of LIBOR on the need for USD cash market to have fallback rates.

Corporate Treasury Chart of the Month

M&A drives demand for the dollar

We are seeing a continued rise in non-U.S. corporates issuing US$ denominated debt this year, with Japanese companies in particular taking advantage of strong investor demand, favourable interest rates and healthy US$ liquidity (see chart below) to deliver an M&A-driven issuance boom.

For example, we recently saw 7-Eleven raising $10.9 billion to fund its $21 billion acquisition of Speedway, the U.S. convenience store operator.

Being a safe haven currency, 2020 was a period of JPY strength against the USD. However optimism of a strong post-pandemic recovery has seen the JPY give back most of these gains since Q1 2021. Corporates with USD liabilities can monitor market expectations of further JPY weakness using apps like FX Polls and the FX probability feature in Refinitiv Eikon.

USDJPY currency basis spreads narrowed during COVID-19 in response to decisive Federal Reserve monetary support and liquidity provision. You can view these spreads using the Refinitiv Eikon Chart app (CHT).

Get these issuance insights in Refinitiv Eikon

  1. Search for the ‘deals screener’ app ‘DSCREEN’
  2. Select ‘USD’ under the ‘currency’ dropdown
  3. Select ‘bonds’ under the ‘asset class’ dropdown
  4. Add ‘date’, ‘target market’, ‘principal amount’ and ‘industry’ filters

Secure your spot: the rise of digital treasury in India

As treasury evolves into a strategic centre for companies, the adoption of technology becomes pivotal to strengthen resilience and insight. Secure your spot at an event we are co-hosting on 24 June 2021 with our partner, leading TMS company IBSFINtech, and hear from a leading panel of experts, including the Country Head of SoftBank and the Head of Global Corporate Treasury at Wipro Enterprises.

Crypto trends

The world of crypto and decentralised finance is starting to broaden in terms of products and coin offerings. And many of the biggest crypto moves have been preceded by shifts in sentiment that can be picked up from social media sources. Watch this seven-minute video to see evolving cryptocurrency trends and how they can be tracked by analysing social media.

Watch the video: Tracking the Biggest Trends in Crypto – Data on the Data

The start of a commodities supercycle?

You can see the rebound of the Refinitiv/CoreCommodities CRB Index is gaining steam in a directional move comparable with the beginning of the last commodities supercycle in the 2000s.

However, the overlay of several cyclical upswings of different raw materials and the transition towards a low-carbon economy suggests something more complex is happening.

Access FX liquidity in Russia

Discover how Refinitiv is helping local and offshore traders maximise access to a broad range of FX liquidity providers in Russia.

LIBOR transition webinar: why does USD cash market need fallback rates?

Join us on Wednesday 14 July to discuss the USD cash market and the need for fallback rates with the Loan Syndications and Trading Association (LSTA), Wells Fargo and The U.S. Federal Reserve. Sign-up today.

On-demand event: COVID-19 recovery in U.S. power and gas markets

As more countries and markets open up after COVID-19 lockdowns, how will U.S. power and natural gas markets be impacted? Hear what our panel of experts from Refinitiv, IIR Energy and Yes Energy think.

 

Refinitiv Corporate Treasury Data Insights | May 2021

31-5-2021 | treasuryXL | Refinitiv |

Andrew Hollins, Director of Corporate Treasury Proposition at Refinitiv, brings you the May 2021 round-up of the latest Corporate Treasury Data Insights.


  1. The latest Refinitiv Deal Makers Survey analysed market sentiment to gauge which M&A sectors will thrive during 2021, while global banking investment fees hit new heights.
  2. A look at the markets statistics from President Joe Biden’s first 100 days in office, and why USD cash fallbacks form a crucial element of the LIBOR transition.
  3. Plus, news on U.S. identity theft, crude oil prices and FX market innovation, as well as a round-up in Refinitiv Corporate Treasury Newsbeat.

Corporate Treasury Chart of the Month

Our latest Deal Makers Sentiment Survey reveals two clear M&A winners emerging from the turmoil of 2020: Technology and Healthcare. Beyond these sectors, M&A optimism tails off quickly, with notable falls including Consumer Retail. On average, deal makers predict a 6 percent increase in M&A activity this year, which bodes well for corporates with access to capital.

Corporate Treasury Data Insights: Subscribe to our newsletter

Global investment banking fees set all-time record

Refinitiv’s leading fee model revealed investment banking fees reached US$39.4 billion during the first quarter of 2021, posting a 45 percent increase compared with the first quarter of 2020 and the strongest opening period since records began in 2000.

Imputed fees in the EMEA region increased 27 percent to US$8.1 billion during first quarter of 2021.

You can access these exclusive modelled fees in Eikon to benchmark against peers, or to support mandate allocation purposes. Navigate to Company Overview -> Event -> Company Deals -> [Asset Type] Equity to compare the latest deals and access detailed tear sheets.

Join our upcoming Refinitiv Academy session for deeper insight on building peer comparison models in Eikon.

Screenshot of Refinitiv Eikon – Capital Market Transactions. Corporate Treasury Data Insights May 2021
Click the image to request a free trial of Refinitiv Eikon

Biden’s first 100 days in 10 charts

U.S. President Joe Biden’s first 100 days in office saw records in both M&A and capital markets, with the S&P 500 recording a stronger performance than any other president in recent history. Here are 10 charts that tell the story.

USD cash fallbacks: a key component of the LIBOR transition

With the most widely used tenors of USD LIBOR subject to cessation immediately following publication on 30 June 2023, how can fallback rates support a smooth transition in the cash markets?  We’ve also put together a guide to help you navigate the LIBOR transition.

Image promoting Refinitiv's Navigating the LIBOR transition guide. Corporate Treasury Data Insights | May 2021

New Report – U.S. Identity Theft: the Stark Reality

With an estimated 42 percent increase in identity-related losses from 2019 to 2020, coinciding with a shift towards digital payment methods during the pandemic, identity crime remains a steadfast challenge.

A new report commissioned by GIACT, a Refinitiv company, uncovers the striking pervasiveness of identity fraud perpetrated against U.S. consumers. GIACT is also hosting a free webinar this Thursday (20 May) on how you can Safeguard Faster Payments: KYC, Account Validation Compliance and Best Practices. Secure your spot!

Have crude oil prices peaked?

The market has recovered following the Coronavirus-induced collapse in prices. With the price now stable at around $60/bbl, Market Voice analyses if this is a pause for breath or a natural ceiling.

Accelerating innovation in FX markets

Refinitiv’s FX platforms reported an average daily volume of $490bn in January 2021, the second highest monthly average since reporting began. Find out how FXall gives traders greater flexibility and control over the staging and execution of their FX orders.

REPLAY: Sustainability and ESG webinar

In April, we hosted a webinar with the ACT, discussing the role treasurers should play in sustainable strategy and operations, green financing and benchmarking. You can also check-out a recent interview between Refinitiv’s Leon Saunders Calvert and Treasury Today, discussing treasury’s role in integrating financially material ESG data.

Refinitiv Corporate Treasury Newsbeat

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Partner Interview | Manipulating market-leading data to navigate volatility

11-05-2021 | treasuryXL | Refinitiv |

As a leading financial markets data provider, Refinitiv is an essential partner for corporate treasurers. Refinitiv’s global, multi-asset and multi-jurisdiction view of risk, credit and economic data enable treasury teams to drive stability by managing the global and interconnected nature of risk today.

⬇️ ⬇️ ⬇️

In this interview, we take a look at how Refinitiv’s corporate treasury customers used Refinitiv data and apps to remain agile and proactive in one of the most volatile years ever. We also consider what data is likely to be needed as we recover from the pandemic and companies seek growth.

An introduction to:

 

Andrew Hollins

Director of Corporate Treasury Proposition, Refinitiv, an LSEG business

 

 

 

 

Rasyid Kwee

Proposition Sales Specialist for Enterprise Solutions, Refinitiv, an LSEG business.

 

 

INTERVIEW

1. From your data, what can be identified about the behaviors and activities of corporate treasurers during the onset of the pandemic?

Using the data we have available, we’ve been able to discern three broad phases of corporate treasury response and action throughout the pandemic. The period March through to May 2020 represents Phase 1, which for many Corporates could be termed the ‘Survival Phase’. During this first phase, we witnessed pronounced patterns of activity amongst our Corporate Treasury clients.

Firstly there was a strong focus on analysing and reviewing the Credit Risk of suppliers, clients and also corporate’s own credit risk. Treasurers wanted to know if their customers would be able to pay for the goods and/or services they are supplying, and if their suppliers were still going to deliver supplies, raw materials, component parts, goods, etc.

We also saw a spike in usage of Company Fundamental Data (app for company financial analysis, for financial statements and valuation metrics for over 90,000 companies listed on 169 exchanges in 150 countries), especially so for balance sheets, income statements, key ratios and Cashflow data. Furthermore, there was an increased appetite for Private Company data, which almost certainly reflected a desire to review the health of the extended supply chain, a trend which has continued.

Finally, there was an increase in usage of Sector-specific Economic Indicator data, up 30% globally from Feb – Mar 2020 (this app allows users to search for any Economic Indicator, chart the history, export to Excel and view associated press releases). An increase was also seen in the use of Peer Analysis data (allows for the comparison of a company against its peers across a multitude of measures and variables), reflecting a demand for wider sectoral intelligence, as well as insight into how related companies were performing in such a stressed environment. Conversely, we also saw a decline in demand for ESG related apps and data, as well as data and apps relating to Libor transition. Libor transition in particular had been a high priority area for most corporate treasurers, but the economic shock brought on by Covid-19 pushed these onto the back burner during the ‘Survival Phase’.

2. What are the Data and App usage highlights from Phase 1?

  • Globally, Credit Default Swap (CDS) data usage grew 115% in EMEA and Americas between February and March 2020. Asia showed a 155% rise in usage of this data during the same period. (The CDS Dashboard app provides comprehensive Streaming price coverage on major global Index and single name CDS from major market maker).
  • In the Netherlands (February to March 2020), there was an 83% rise in usage by Corporate Treasurer’s use of credit and credit risk data, specifically;
    • 68% rise in use of Debt Structure data (both for oneself and for one’s peers)
    • 67% rise in Starmine Credit Risk data (Starmine Credit Risk models utilize industry-specific accounting ratios, equity market valuations and text mining models to produce a 1-100 score of an company’s credit risk).
  • During the same period we also saw significant increases in usage of company fundamental and private company data. At the same time there was a clear drop in consumption of ESG data.
      • 81% rise in Company Fundamental data
      • 33% rise in Private Company data
      • 45% drop in use of ESG data

  • Looking at year on year data for the Netherlands for March 2020 and March 2021, we saw a 50% rise in CDS data; 50% rise in Debt Structure Data; 66% rise in Industry sector data; 113% rise in use of peer analysis apps.
  • Furthermore;
    • Private Company Data and Analytics grew by 31% between February to March 2020, receding during the summer months but then grew >100% from October 2020 into Q1 2021.

3. As the pandemic progressed, how did the behaviors and activities of corporate treasurer’s change?

Moving on from ‘Phase 1’ (above) and heading into ‘Phase 2’, which we can place from mid Q2 through to Q3 and call the ‘Cash Phase’, many companies focused on cash preservation and extending their cashflow runway as far as possible. Companies focused on maximising all sources of liquidity, in some cases working with suppliers to extend payment schedules and expedite receivables as far as possible. Companies also drew down reserves and utilised credit facilities. We also saw Bond Issuance accelerate significantly especially in Q3.

4. What are the Data and App usage highlights from Phase 2?

In the Netherlands, from June to October 2020, we saw a notable pick-up in usage of Issuance and Credit-related data and analytics:

  • A 40% rise in usage of the New Issues Monitor – (app providing a comprehensive library of new issues covered by Thomson Reuters and supporting IFR).
  • A more than 250% jump in usage of Starmine Credit Risk analytics and data
  • A 25% rise in usage of the Fixed Income All Quotes app

At the same time, there were also further significant changes in usage of apps and data related to the financial health of the supply chain and the corporate ecosystem in general:

  • Income Statement: Up 116%
  • Balance Sheet: Up 72%%
  • Key Ratios: Up 160%
  • Cashflow: Up 175%

5. How do you see the behaviors and activities of corporate treasurers changing as we move into a recovery mode from the pandemic?

If we identify Phase 3 as the ‘Recovery Phase’, which focuses on positioning and planning for a return to normality, or at least a new normal, our usage data suggests that many companies continue to focus on bond issuance and refinancing in order to take advantage of current lower yields. It’s notable that issuance of US$ denominated debt by non-US companies has been particularly strong in the first quarter of 2021.

There are distinct trends apparent in the usage data for our issuance-related Data and Analytics apps, in particular:

  • DCM Pricer – usage is up 21% from November 2020 to March 2021 (a custom bond calculator designed to build new bond issues and price them for the primary market)
  • Debt Structure app – usage is up 20% between November 2020 and March 2021
  • New Issues Monitor – usage is up 52% from November 2020 to March 2021 (New Issues Monitor provides a comprehensive library of new issues covered by Thomson Reuters and supporting IFR).

As countries navigate out of the pandemic, we can also see that ESG is firmly back on the agenda, with usage of our ESG apps and data rising strongly as we move deeper into 2021. For much of the pandemic period many companies focused on survival, but a rapidly developing global sustainability landscape is contributing to a significant shift towards adopting and ESG standards and behaviours across the corporate sphere.

Globally, ESG Data and Analytics Usage has grown 93% between Dec 2020 and March 2021, higher than the pre-Covid-19 peak.

  • Across EMEA, this was up 78% in the same period.
  • In the Netherlands, although below the global and EMEA percentages, ESG Data and Analytics usage was still up 35% in the same period.

Looking beyond Covid-19, conversations with our corporate treasurer clients have revealed an appetite for greater visibility and predictability when it comes to cash and liquidity management. Aligned to this, is a desire for increasingly accurate forecasts and risk analysis regarding projected future cashflows. Hedge accounting and hedge effectiveness tools also feature strongly in these conversations.

Furthermore, automation to support more robust and frequent analysis and reporting, as well as a comprehensive enterprise-wide view of cashflow, risk and liquidity, are also areas of growing interest which are going to feature more in the post-pandemic landscape.

Finally, ESG data consumption has recovered and is now above pre-Covid-19 peaks. This trend is likely to continue on its upward trajectory, becoming systemically more prevalent than it was pre-pandemic, given the rapidly evolving regulatory and demand led factors which are driving an ever-greater focus on sustainability. We recently hosted an event with the Association of Corporate Treasurers on treasury ESG roles and responsibilities which you can watch on-demand here.

6. How can corporate treasurers gain access to Refinitiv’s market-leading data and navigate current and future volatility?

Serving more than 40,000 institutions in approximately 190 countries, Refinitiv provides advanced data and technology to help corporate treasury teams make critical decisions with confidence. Our corporate treasury solutions help deliver accurate and relevant data, tools and analytics that can be accessed easily and intuitively – advancing your end-to-end workflows and ensuring seamless integration with your entire treasury management eco-system.

To find out more, speak with our experts by completing your details here.

Read more about Refinitiv, an LSEG Business here.

 

Refinitiv Corporate Treasury Data Insights | April 2021

21-04-2021 | treasuryXL | Refinitiv |

Andrew Hollins, Director of Corporate Treasury Proposition at Refinitiv, brings you the April 2021 round-up of the latest Corporate Treasury Data Insights. We will learn about what an increase in inflation will mean for treasurers’ FX hedging plans – and how best to protect your company’s position. Moreover, an update is provided on the Suez Canal traffic jam, and the impact on trade flows, freight movement and prices in the coming months. Plus, some insights on metal prices, ESG, LIBOR and mobile FX trading are shared.

Are inflation fears justified?

While expectations of inflationary pressures have risen significantly over the past six months, reflected in the chart above, the market points to moderating price pressures in the medium-term as revealed by the breakeven yield curve for inflation linked bonds.

Expectations of an inflation spike in the U.S. and elsewhere, perhaps peaking in 18 months to two years, are likely to impact treasurers’ FX hedging plans.

Take the best performing G10 currency so far this year – GBP. While the outlook into H2 2021 and beyond remains uncertain with possible Brexit-linked fallout and a potential separatist supermajority in the Scottish elections on 6 May, continued success on the vaccine front should deliver the dividend of an accelerated economic recovery in the UK.

FX hedging strategy

Corporates with FX exposures may consider a Forward Extra as part of their hedging strategy – an FX option which protects from downside risk but also allows for some upside gains.

Treasurers can use Refinitiv Eikon to manage currency exposure:

  • Price a Forward Extra using the FX Options Calculator (FXOC), employing key events like the Scottish elections in May as reference points.
  • Analyse volatility relative value using Currency Performance (FXPT).
  • Analyse volatility skew and an implied probability distribution chart in FX Volatility Explorer (FXVE).
  • Keep a close eye on inflation forecasts with Reuters Polling (POLLS), which forecasts a rise in U.S. inflation to 2.4 percent for the year until March 2021, and Rates Views Inflation Screen (RVIN) to monitor breakeven rates.

Emerging market currencies and stocks struggle

While vaccine progress is supporting the position of both GBP and USD, emerging market currencies are telling a different story.

Steering the post-pandemic recovery

Reuters newsmaker with Christine Lagarde, President of the European Central Bank. After taking radical steps to combat the recession, global policymakers now face the task of ensuring recovery takes hold. Lagarde joins Reuters for an exclusive Newsmaker to discuss the best policies to prevent COVID-19 from scarring economies, how and when policy support might be withdrawn, whether rate setters might be facing a major shift in the inflation regime and the challenges that are unique to the euro zone.

Join the conversation.

Suez traffic jam clears, but what’s the impact?

Satellite data from Eikon’s Interactive Map, pictured below on 29 March, shows the Suez Canal blockage beginning to ease. However, treasurers should expect more volatility in the coming months.

The freight derivative markets for dry bulk carriers are seeing heavy traded volume in 2021 due to high volatility, potentially exacerbated by the Suez incident.
Data from the Baltic Exchange for the week ending 19 March 2021 show a record of 78,059 lots of Dry FFA (Freight Forward Agreement) traded, a record not set since 2008.

Will gold remain bullish in 2021?

Gold is seen as a hedge against uncertainty and hence we witnessed a drastic increase in pricing during the pandemic. However, will vaccine rollouts and stimulus measures cause this precious metal to bottom out?

Watch – Refinitiv Metals Outlook 2021: Gold

How Mercuria proactively manages commodities exposure

Mercuria is a global energy and commodity group, with business lines covering a diverse range of commodities trading, as well as large scale infrastructure assets. Discover how they manage exposures in FX, FI and commodities markets, as well as credit terms with trading counterparties.

Sustainability and ESG: what role should you play?

Today, no two treasury teams are alike when it comes to sustainable finance roles and responsibilities. However, will upcoming regulatory and political change result in clearer and globalised standards and benchmarks? And what should treasurers be watching out for?

Join us, the ACT and two leading treasurers from Page Group and Optivo next week to discuss these significant developments – and how treasurers can support future growth ambitions, sustainably.

LIBOR: What you need to know about fallback and transition data

To prepare for the oncoming LIBOR transition and IBOR reform, hear from Trang Chu Minh and Fausto Marseglia as they discuss fallback and transition data in relation to your bonds portfolio, and the main aspects of ISDA fallback rates.

Watch – Refinitiv Perspectives LIVE: The LIBOR Transition: Fallback & Transition Data

Refinitiv Corporate Treasury Newsbeat

Refinitiv’s Taking FX Trading Mobile: responding to the shift to remote working – with mobile trading apps predicted to be the most influential technology shaping the future of trading – Refinitiv is working with partners to develop a seamless end-to-end FX workflow, accessible by mobile app.

LSEG Automates $7bn Debt Capital Transaction: last month, London Stock Exchange Group (LSEG) successfully priced a landmark syndicated multi-tranche and multi-currency offering, raising  $7bn equivalent across nine tranches.

Key transaction steps were conducted on Flow, a digital platform driving end-to-end automation in primary debt markets, developed in partnership with Nivaura.

This is the most complex transaction to use a primary debt capital markets digitisation platform, and a milestone for LSEG, as its largest bond and first USD Reg S/ Rule 144A issuance. Find out more about the landmark transaction.

 

 

Invite Refinitiv Newsletter | Corporate Treasury Data

06-04-2021 | treasuryXL | Refinitiv |

Trusted by 15,000+ corporate treasurers, our Partner Refinitiv’s free monthly mail contains the latest Refinitiv data insights, must-read analysis and practical advice for Corporate Treasury teams. We dig into everything from Cash management, Market monitoring, Funding, Investments, Trading, Risk and Sustainable finance: supporting your workflow from start to finish.

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ACT Webinar – Sustainability and ESG: what role should you play?

31-03-2021 | treasuryXL | Refinitiv |

Webinar on April 22 at 12:30-13:15 BST

This webinar, in association with our Partner Refinitiv, will take place on Thursday 22 April at 12:30 – 13:15 BST.

Will upcoming sustainable regulatory and political change result in clearer and globalized standards?

Today, no two treasury teams seem to have a consistent view of their roles and responsibilities when it comes to sustainable finance. However, will upcoming sustainable regulatory and political change result in clearer and globalized standards and benchmarks? What should treasurers be watching out for? And what action should they take?

Join us for a practical discussion where we’ll outline the most significant developments coming our way – and how treasurers can respond effectively to protect P&L and balance sheets, supporting future growth ambitions.

Topics to be discussed:

Where we are today
  • When we say ‘Sustainable Finance’ and ‘ESG’ – what do we mean?
  • Various roles we see treasurers play today
  • Overview of the political and regulatory landscape
Opportunities to drive sustainable growth and leadership and solve for potential challenges
  • EU Taxonomy – impact of proposed changes and opportunities to be exported
  • Opportunity – Issuance of Green and Transition Bonds and how to stop brainwashing
  • Global ESG reporting and benchmark landscape
  • Carbon pricing
    – > What is happening and how to compare the performance of peers
    – > How to understand and report on Scope 2 and 3 emissions

       REGISTER HERE

 

[Developer Webinar] Instrument Pricing Analytics for Bond Pricing and LIBOR alternatives

10-03-2021 | treasuryXL | Refinitiv |

Webinar on March 30 at 10 am BTS

LIBOR is widely embedded in operating models and a transition to alternative rates will affect how many contracts are priced and risk managed.

Join this webinar where Refinitiv will showcase and demonstrate examples in Python. Register by entering your details by clicking the banner above.

Refinitiv will be using Instrument Pricing Analytics API to price:

  • Fixed Rate Bonds
  • Floating rate notes on new Risk-Free Rates

From a Quantitative perspective exploring: 

  • Impact of LIBOR transition on Bond Pricing & generating yield curves

 

The future of trading: The rise of data analytics in trading

11-01-2021 | treasuryXL | Refinitiv |

 

Redefining data: What is your strategy?

With more information available than ever, traders must find the right data, make sense of it, and ultimately take action.

 

 

With more information available than ever, traders must find the right data, make sense of it, and ultimately take action. Unstructured information, the explosion of alternative data, and the need for trusted sources makes an already daunting task even more complex.

 

In our second report with Greenwich Associates on the trading desk of the future we explore the data that will keep markets moving over the next 3-5 years. With an overwhelming 85% of those surveyed planning to increase spending on data management, the value of financial data is clearly increasing.

Alternative data tops the list of most important data types, but is only useful if traders trust the source. When it comes to issues of scale and trust, 41% of those surveyed will rely on large financial markets data aggregators. Finally, analytics to interpret existing, new and unstructured data are becoming as critical as finding the data itself.

 

The bottom line? Everyone needs a data strategy.

 

Download & Acces full report