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Industry roundup: 11 January

Fides extends multibanking ecosystem for corporate treasury and finance

Fides Treasury Services has announced additional details about its roadmap to extend its 'one-stop shop' for corporate treasury and finance solutions. The Fides marketplace will be accessible via the vendor's Multibanking Suite web portal. The modular Fides Multibanking Suite is designed to give corporate treasury and finance professionals complete visibility into and control over their banking connections and transactions, with secure access from any location. Administration and approvals are controlled through a single tool, with a single sign on and intuitive user interface, saving time and effort while providing visibility into all aspects of workflows.

“The Fides multibanking ecosystem spans the entire treasury world, allowing us to offer a wide range of partner solutions that extend the value of our Multibanking Suite,” said Simon Kaufmann, head of Client Relations and Marketing at Fides. “From FX to money markets and beyond, we will be offering easy access to innovative products and services from trusted Fides partners.”

The Fides partner network includes software and consultancy service providers as well as ERP and TMS vendors. Kaufmann says that Fides is actively engaging in discussions with companies offering and developing tools and services that are complementary to multibanking technology.

“Our goal is to provide a single platform where corporate treasurers, treasury analysts, cash managers, and CFOs can access all the tools they need to manage their day-to-day responsibilities,” added Rod Gabriel, head of Products and Solutions at Fides.

In the first phase of Fides’ digital open ecosystem expansion strategy, partner solutions will be listed within the Fides Multibanking Suite. Over the course of the year, the firm says it plans to provide deeper integration with these offerings, including single sign on across the entire ecosystem.

 

Stimulatory monetary and fiscal policies enhance corporate credit outlook

An extraordinarily accommodative monetary policy helps financial markets view the Democratic Party’s takeover of Congress in a positive light, according to a new report from Moody’s Capital Markets Research. For now, markets expect the Federal Reserve will offset any potential loss of business activity to increased regulation or higher taxes via measures that effectively increase systemic liquidity. Of special importance is how markets seem willing to tolerate an atypically wide federal budget deficit and an even higher ratio of US government debt to GDP, writes John Lonski, Moody’s Chief Capital Markets Economist.

Markets assume that the Fed’s overarching incentive is to achieve full employment as quickly as possible. Thus, the Fed will reverse any rise by Treasury bond yields that might impede the realisation of full employment, provided that markets do not disapprove.

When might markets tell the Fed to stop temporarily monetising the federal deficit and say no to the continuation of federal budget deficits well in excess of 6% of GDP? Perhaps, the economically destructive return of accelerating price inflation and destabilising exchange rate depreciation might be the developments which bring an end to the Fed’s placing the attainment of full employment ahead of price stability.

The 1970s supply two prime examples as to what is meant by accelerating price inflation, Lonski says. The first example has the calendar-year average annual rate of PCE price inflation bottoming in 1972 at a relatively brisk 3.4% then rising to 5.4% in 1973 and peaking at 1974’s 10.4%. The next episode saw the annual rate of PCE price index inflation climb from a 1976 low of 5.5% to 1977’s 6.5%, 1978’s 7.0%, 1979’s 8.9% and then cresting at 1980’s 10.8%. Recessions brought an end to each of those two instalments of accelerating price inflation. For now, the good news is that the available evidence favours a much milder rise, if any, by PCE price index inflation.

Not only is PCE price index inflation expected to outrun 2021’s average five-year US Treasury yield by 1.25 to 1.5 percentage points, but the 2021’s expected average 10-year Treasury yield of 1.25% may trail the accompanying rate of nominal GDP growth by 4.5 to 5.0 percentage points, according to the Moody's report. Thus, 2021 discount of the 10- year Treasury yield to nominal GDP growth may be the deepest since the 5.2 percentage point shortfall of the year-ended March 1979. But that gap did not last; the 10-year Treasury yield’s moving yearlong average advanced from March 1979’s 8.7% to March 1980’s 10.1%, while nominal GDP’s trailing yearlong growth rate slowed from the 13.9% of 1979’s first-quarter to the 10.7% of 1980’s first quarter.

Regardless of the Federal Reserve’s now highly accommodative policy tone, the upside potential for Treasury bond yields is well above what markets currently anticipate, Lonski writes. Because of the Fed’s perceived willingness to purchase Treasury debt for the purpose of stabilising Treasury bond yields, the US government does not face the same budgetary constraint that is ordinarily imposed on Washington by the Treasury bond market. However, a soft budgetary constraint may not persist indefinitely.

 

EIB Group and BNP Paribas launch securitisation operation to support French companies 

The EIB Group, made up of the European Investment Bank (EIB) and European Investment Fund (EIF), and BNP Paribas have announced the signature of a synthetic securitisation to support French small and medium-sized enterprises (SMEs) and mid-caps hit by the consequences of an unprecedented pandemic crisis.

The operation, supported by the European Fund for Strategic Investments (EFSI), consists of an EIB Group guarantee on an existing portfolio of loans to SMEs and mid-caps. This credit protection enables BNP Paribas to free up part of the regulatory capital allocated to this portfolio and to deploy €515m of new loans to SMEs and mid-caps in France over the next two years.

The financing operations may take the form of bank loans or leasing transactions. The beneficiaries of this financing will have access to favourable financial terms via an onlending deal granted by the EIB. 

This operation falls under the European Fund for Strategic Investments (EFSI), the central pillar of the Investment Plan for Europe. It will make it possible to strengthen support for SMEs and mid-caps hit by the consequences of the COVID-19 health crisis by meeting their cash flow and investment recovery needs. As a European operator recognised for its expertise in synthetic securitisations, the EIF was in charge of structuring the operation on behalf of the EIB. This is the third securitisation transaction between the EIB Group and BNP Paribas since 2015.

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