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Industry roundup: 26 October

Citi adds on-demand sweeps in China

Citi has announced the launch of On-Demand Sweeps (ODS) in China, described as a new digital liquidity solution for corporate clients to self-service real-time sweeps and manage their working capital more efficiently.

“ODS is Citi's innovative offering in response to the market demand and emerging treasury needs for real-time liquidity adjustments,” the group said in a press release. “Using ODS, companies with subsidiaries in China will have the flexibility to physically pool the funds between their physical cash concentration accounts as and when required, or at a scheduled time.

“This allows treasury managers to swiftly adjust the amount and direction of their cash pool sweeps even after payment cut-off times. Companies that previously struggled with liability sharing or overdraft availability can now establish a China domestic cash pool or Shanghai Free Trade Zone Advanced Cross Border Cash Pool to optimize their working capital.”

China is the first market in Citi's global network to offer ODS, further expanding the bank's suite of real-time liquidity solutions, which it says are designed to help clients unlock strategic working capital in today's ever-shifting post-pandemic environment.

“The ODS solution enhances transparency and control for clients to optimise their liquidity in real time, unlocking previously restricted scenarios for cash pooling in China,” said Howard Yang, China Head, Treasury and Trade Solutions, Citi.

Sandip Patil, Asia Pacific Head of Liquidity Management Services, Treasury and Trade Solutions, Citi added: “For our clients managing liquidity in China, ODS is a strategic tool for enhancing real-time treasury agility. Treasurers can now make more informed and faster funding decisions leveraging digital dashboards for cash pooling structures, and real-time data analysis for interest reallocation calculation and settlements. Pre-set parameters that meet China regulatory control requirements are also automatically fulfilled and validated.”

Bing Ma, Chief Financial Officer, Aland Health Holding, China commented: “After establishing a Shanghai Free Trade Zone advanced cross-border cash pool with Citi, the on-demand sweep now enables us to adjust both domestic and cross-border pooling directions and positions as needed, at any time. We now have greater agility and flexibility in managing our funding needs, and the real-time solution also ensures that we meet regulatory quota controls with built-in algorithms and comprehensive reporting capabilities.”

New companies swell US junk bond market

The US junk bond market has grown to a record size, with outstanding debt rising above US$1.5 trillion as nearly 150 companies have joined since the start of the year reports the Financial Times.

The new arrivals, including cryptocurrency exchange Coinbase and medical supplies manufacturer Medline have joined the high-yield bond market this year, where lower-rated, riskier companies borrow money from large asset managers, pension funds and other investors seeking yield, according to data provider
Leveraged Commentary & Data.

The FT comments that the companies have extended a trend set in motion by central bankers’ response to the Covid-19 pandemic in lowering interest rates and injecting liquidity into financial markets to prevent a more severe downturn.

Companies seeking to raise cheap funds have found investors keen to put cash to work, especially in assets such as corporate junk bonds that yield more compared with government debt. As more-established debt issuers have tapped the market, bankers have looked to new companies to maintain the flow, aided by bumper buyout activity that has created a need to finance acquisitions.

“A lot of those deals are made possible by a very low cost of capital and with that you see more issuers coming into the high-yield bond market,” Chris Blum, head of leveraged finance at BNP Paribas, told the paper.

He added that many companies had also refinanced so-called leveraged loans in favour of high-yield bonds, fixing low borrowing costs before they start to rise. The deluge of issuance has increased the face value of outstanding debt in the high-yield bond market above US$1.5 trillion for the first time, according to a widely tracked index run by Ice Data Services.

In September 2021 a total of 26 new corporate issuers came to market, equalling a record set in April according to data going back to 2005. This month has seen a further 13 new issuers join, making up a quarter of the notional dollar value raised in the junk bond market, with the online gaming platform Roblox reported to be the latest arrival.

Ripple and Pyypl partner in Middle East for on-demand liquidity

Ripple has announced the launch of RippleNet’s first-ever On-Demand Liquidity (ODL) deployment in the Middle East, partnering with Pyypl, the international blockchain-based financial services technology
company in the Middle East and Africa.

ODL leverages XRP, a digital asset on the XRP Ledger for instant and low-cost cross-border payments that eliminates the need for costly pre-funded accounts.

Ripple adds that it was the first enterprise company to leverage crypto to tackle the trillion-dollar challenges with cross-border payments. By using ODL, financial institutions and small to medium-sized
enterprises (SMEs) can now leverage previously trapped, pre-funded capital to grow and scale their business.

“The establishment of yet another first-in-market ODL launch demonstrates the understanding that digital assets will play a central role in the future of global payments,” said Brooks Entwistle, Managing Director of RippleNet in APAC and MENA. “We are delighted to partner with forward-thinking companies, like Pyypl, to ensure we can continue to break the status quo in the current global financial system to continue delivering the best experience for customers.”

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