How Treasurers Can Navigate Cash Markets in 2022

With central banks simultaneously trying to support economic reopenings post-Covid and manage a surge in inflation, the knock-on effect has been felt in both the short-term investment space and corporate cash management. Daniel Farrell of Northern Trust Asset Management, and James Douglas of Rabobank, spoke during a recent TMI webinar about how market trends may evolve in the year ahead and what this could signal for treasurers.

As the news around the Covid-19 pandemic evolved in 2021, so too did the financial markets. At the beginning of the year, good news broke about the various vaccines being created by multiple pharmaceuticals. However, there was still uncertainty around the roll-out and how quickly that could happen. At that point, central banks still had very loose policies, with market expectations that the Bank of England might take the base rate negative. Contrast that with the end of 2021 when a potential base rate of more than 1% was mooted for the end of 2022.

Daniel Farrell
Director, International Short Duration Fixed Income, Northern Trust Asset Management

“Central bank reaction and the need for any monetary policy certainly evolved over 2021,” reflects Daniel Farrell, Director, International Short Duration Fixed Income, Northern Trust Asset Management (NTAM). “Interest rates have been anchored at these low levels, while at the same time we have seen the impact of quantitative easing from central banks including the Federal Reserve, the European Central Bank [ECB] and the Bank of England, which has been creating a lot of excess liquidity in the market, particularly in the front end. At the same time, there were other liquidity operations, such as the ECB’s targeted longer-term refinancing operations, which were essential in the pandemic but have caused downward pressure to front-end yields.”

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