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Act now to address FED’s interest rate end game, says GTreasury



Corporate treasury departments should decide now how they are going to roll over their hedged debt as interest rates rise and existing exposures mature, even if maturity is in the next year or two, says GTreasury Vice President of Market Development, Risk, Peter Seward.

“Now is the time to act because existing hedges are going to roll off, and if they were put on a few years ago, companies are going to experience an inescapable, sudden increase in the cost of funds. And the way rates will move over the next six to 18 months will further impact the cost of funds,” Seward said in a recent webinar hosted by GTreasury and Strategic Treasurer. During the webinar, “Interest Rate Volatility: A Decade’s End Game,” Seward demonstrated the benefits of scenario analysis and simulation to model future cost of funds.

Almost half (49%) of 200 poll respondents indicated that rising interest rates are impacting the level of debt they maintain, their investment portfolio, or both. “This tracks almost exactly to Strategic Treasurer and TD Bank’s major Treasury Perspectives survey completed at the beginning of 2018, indicating a consistent and sustained impact of this view among corporations,” said Craig Jeffery, Founder and Managing Partner at Strategic Treasurer.

Using scenario analysis and simulation models in the GTreasury system, Seward demonstrated the impact on a rolled, unhedged credit facility, given various market outcomes, including a credit crisis, which 29% of respondents said was their greatest fear with regards to the current interest rate environment. Fifty-five percent said their greatest fear was that a continued rate hike would significantly increase the cost of borrowing. “Delaying assessment is going to be expensive,” Seward said. “Now is the time to think not just about next year, but the year after that.”

Eighty-five percent of respondents said they use some approach to assessing interest rate risk (scenario analysis, simulation models, advice from lenders, etc.). Seward encouraged the audience to continue using a mix of approaches to gain context. “Adopting a systematic approach and having systems appropriate to your organization to do that analysis is very important. Because in the end, the recommendation from treasury will go up to the CFO and the Board, so being able to present and argue your case is important,” he said.

To view the webinar on demand, go to



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