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Corporate Treasury Data Insights | March 2021

Andrew Hollins
Andrew Hollins
Director of Corporate Treasury Proposition at Refinitiv

Andrew Hollins, Director of Corporate Treasury Proposition at Refinitiv, brings you the March 2021 round-up of the latest Corporate Treasury Data Insights on optimising your FX hedging strategy.

  1. Analysis into the growth of FX options and dual currency deposits, and how treasurers can navigate and capitalise on these complex instruments.
  2. How Haier Group established an intelligent one-stop global FX management model, which saw a 20 percent improvement in response times.
  3. Plus, updates on the sustainable bond market, the LIBOR transition, and the likelihood of a commodities supercycle.

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Corporate Treasury Chart of the Month

The FX options market grew a remarkable 147 percent between 2004 and 2019. The chart shows that this trend is largely driven by global banks and other financial institutions such as hedge funds, as opposed to traditionally more risk-averse corporates that often prefer to hedge currency risk using FX forwards.

Despite this, we have recently observed increased activity in the FX options market by larger, globally integrated corporates with automated electronic trading systems.

With the ongoing transition to electronic trading, FX options seem poised for even more growth. But the question is: will we begin to see broader corporate participation in the FX options market, or will they continue to favour FX forwards when it comes to hedging?

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Watch the webinar: FX Options Execution

In this on-demand webinar, our FXall team speak with CEO of Optiver, the number one market maker for FX options on the CME, on how you can navigate this complex instrument.

DCDs and additional yield: what’s your risk appetite?

While we’re talking optionality, a dual currency deposit (or DCD for short) is a deposit with an embedded put option which offers an attractive enhanced yield in a low interest rates environment.

However, any advertised yield will only be meaningful if you receive proceeds in your deposit currency at maturity. And at that point, depending on how the FX rate has moved, your bank has the right to deliver the proceeds in either the deposit currency or the alternate currency.

Refinitiv Eikon offers market-leading tools to help you assess the general market landscape, and evaluate the risk implicit in the DCD:

  • Get an overview of current money-market activity with All Quotes (for levels of market deposit rates), Rates Views (to assess the wider money market) and FX Polls (for a view on where market experts think FX rates will move).
  • Use the FX Options Calculator (FXOC) and FX Volatility Explorer (FXVE) in partnership to model Strikes and Yields and to understand how likely it is that the market FX Spot rate at maturity will breach the Strike rate contracted in the DCD. Get in touch with our sales team for a demo!

How Haier Group improved FX risk response times by 20 percent

2020 brought a dramatic shift in working habits, with many treasurers now operating remotely. The need to harness technology for real-time cash visibility, dynamic forecasting and a 24-7 view on FX risk and exposure is of critical importance.

Luckily, consumer electronics company Haier Group had already established an intelligent one-stop global FX management model. It saw FTE savings of 300 hours per annum for a single worker, and a 20 percent improvement in response times – all while mitigating the impact of FX volatility.

Tackling climate change through the sustainable bond market

What are the core components of a climate transition strategy? And how can we outline the eligibility criteria for ‘climate transition’ bonds?

Listen to the latest Digital Roundtable from the London Stock Exchange (LSE) to hear leading market participants from HSBC and the Transition Pathway Initiative (TPI) tackle these questions.

Milestones for a successful LIBOR transition

While LIBOR is expected to officially cease at the end of 2021, firms must stop using GDP LIBOR in the new issuance of loan products and linear derivative activity at the end of this month.

The video below provides an overview on all upcoming milestones, and tips for finding a sound and sustainable replacement rate.

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

Are we heading for a commodities supercycle?

Research published by top investment banks suggests markets may be about to embark on a commodities supercycle – a multi-year, broad-based, and usually large increase in prices. We examine the likelihood of a super cycle or regular upturn.

Refinitiv Corporate Treasury Newsbeat

Refinitiv’s FXall empowers treasurers to make smarter trading decisions and minimise execution costs through order splitting.

Order splitting provides greater flexibility and control over the staging and execution of FX trades because an order can be split into multiple smaller orders, and traded using the execution methods most likely to minimise market impact and reduce spread costs.

Treasurers can also cancel an in-flight algo order, and immediately execute the remainder via RFQ.

Coming up next: we’re constantly making improvements to our FX trading platforms. We will soon be introducing new algo benchmarks and simplifying regulatory reporting capabilities.

Find out more and get in touch with our team.

Corporate Treasury Insights


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