Softer rise in Japan’s business activity in September

Japan’s flash composite output index for September posted 52.5, showing overall growth but at a slightly slower pace than in August (52.9). The services sector powered the composite growth, as the manufacturing sector showed contraction.

The headline au Jibun Bank Flash Japan Manufacturing Purchasing Managers' Index (PMI) fell slightly from 49.8 in August, to 49.6 in September, to signal that Japanese manufacturing business conditions weakened for the third consecutive month. 

Production levels fell marginally, but for the second time in three months, while new order inflows fell at a modest albeit slightly softer rate. At the same time, employment broadly stalled at the end of the third quarter. Lead times deteriorated in September, with the latest lengthening the most marked since February, which encouraged firms to build stocks of purchased items for the first time in three months. Rates of inflation for input costs and output prices eased on the month. Lastly, the overall degree of confidence regarding the 12-month outlook for output softened to its least pronounced since December 2022.

The au Jibun Bank Flash Japan Services Business Activity Index posted 53.9 in September, up from a final reading of 53.7 in August, indicating that services activity continued to expand at a solid rate at the end of the third quarter. Supporting output was a twenty-ninth successive monthly rise in new business. 

As a result, Japanese service providers raised employment levels further, despite confidence levels slipping to a 20 month low. On the price front, average input costs rose at the softest rate since March. But prices charged for Japanese services rose at an accelerated pace as firms looked to pass higher cost burdens on to clients.

 

Fed rate cut not enough to tempt MMFs into longer-term T-bills - JPMorgan Chase

The inverted yield curve for money markets means that short-term T-bills are offering higher yields than their longer-term counterparts, discouraging MMFs from extending the maturity of their holdings.

“The lack of clarity on how the easing cycle will unfold and the inverted yield curves,” are key challenges facing the market, JPMorgan Chase & Co. strategists, led by Teresa Ho, wrote in a note to the bank’s clients last week.

Currently, the yield spread between one-month and one-year T-bills is about 82 basis points (bps) in the negative, while the gap between three-month bills and two-year notes is even wider, at 106 bps. Such inversions have prompted a shift toward shorter-dated securities, reducing the weighted average maturity of funds’ assets.

“These curves remain deeply inverted, challenging liquidity investors’ willingness to add duration,” Ho noted.

Government MMFs, the main buyers of T-bills, shifted their focus in August, increasing their holdings of bills maturing within 31 to 60 days by $226bn, according to JPMorgan. At the same time, they trimmed their exposure to longer-term bills, reducing holdings of those maturing in more than 60 days by $53bn.

Prime funds, which invest in riskier assets like commercial paper, have also adjusted their portfolios. These funds have increased their allocation to floating-rate notes, which now account for 20% of their holdings, up from 15% at the start of the year. According to Ho, these floating-rate notes offer better protection in the current environment while still capturing attractive yields.

Ultimately, however, Ho expects assets under management in MMFs to grow through the rest of the year. “Given the still inverted front-end yield curve and the yield advantage MMFs have over other cash alternatives, we expect MMF AUMs will continue to rise into year-end,” Ho revealed.

 

DTCC and Digital Asset complete tokenisation pilot for collateral and margin optimisation 

Digital Asset, a provider of blockchain solutions, in collaboration with The Depository Trust & Clearing Corporation (DTCC), has announced the results of the US Treasury (UST) Collateral Network Pilot, an initiative focused on leveraging DLT applications to support market connectivity across the collateral management lifecycle to enhance mobility, liquidity and transactional efficiency of tokenised assets.

In the pilot, Digital Asset, four investors, four banks, two central counterparties, three custodians/collateral agents, and a central securities depository operated fourteen Canton nodes, connecting four types of cross-application transactions through ten distributed applications, leveraging DTCC’s LedgerScan solution to support dynamic tracking and governance of the assets involved in the pilot transactions. 

Participants successfully executed 100 transactions, demonstrating tokenised collateral assets’ functionality and potential. This pilot builds on the successful Canton Network Pilot completed in December 2023, which established the foundation for composable applications across a global economic network. 

The UST Collateral Network Pilot, conducted in June and July, proved the feasibility of more complex real-world transactions, including the creation of a digital twin of USTs, utilising the tokenised UST assets in real-time to satisfy margin calls, completing asset recalls, and evidencing secured party control over the assets in closeout scenarios.

“The successful completion of this pilot proves that tokenised assets could be leveraged to optimise collateral,” said Kelly Mathieson, Chief Business Development Officer at Digital Asset. “In addition to the liquidity and operational efficiencies gained, the pilot demonstrates how tokenised collateral can improve market transparency, legal certainty of ownership in seizure/close out scenarios, and significant real-world benefits, including faster collateralisation and enhanced regulatory oversight.”

“This pilot successfully demonstrated the power of tokenization – and its potential to enhance collateral mobility and unlock liquidity," added Nadine Chakar, Global Head of DTCC Digital Assets. "The collaborative effort behind this innovative pilot reinforces DTCC’s commitment to partnering with the industry to harness DLT’s capabilities to advance a scalable and resilient infrastructure that ultimately drives increased value for our clients and the industry.” 

 

Airwallex streamlines McLaren Racing's financial operations 

Global payments and financial platform Airwallex has revealed how its global financial technology has improved McLaren Racing’s financial operations throughout the 2024 Formula 1 season. 

Prior to this partnership, McLaren’s international payments run consisted of 30 payments made one at a time, which was inefficient and time-consuming. With Airwallex, McLaren can now push payments through a custom approval process and execute a batch payout using a template, taking a little under an hour per run. Over the course of a month, this new process is saving the McLaren Racing finance team half a day of work.

In addition, previously, the McLaren Racing finance team experienced slow transfer speeds – two to five business days – and high transfer fees when paying their international suppliers in US dollars.

As a result of leveraging Airwallex’s end-to-end payment system, McLaren Racing today receives competitively priced foreign exchange (FX) rates and moves money through an extensive local payout network. McLaren Racing now has the flexibility to pay each global vendor in their local currency while reducing transfer times. For payout transactions, 90% arrive within hours, and 65% arrive instantly.

“At McLaren, speed and innovation are essential to our success both on and off the track,” said Laura Bowden, CFO at McLaren Racing. “Like all departments at McLaren, the finance team is mandated to look for marginal gains by consistently reviewing processes and using technology to optimise our business. By constantly monitoring spend and reporting back to the business, we can find new ways to free up funds to re-invest in our on-track efforts.”

Airwallex and McLaren Racing first announced their multi-year partnership in February to further enhance the team’s existing payments infrastructure, specifically across treasury management as well as cross-border pay-outs and settlement. 

 

Digital enthusiasm undercut by lack of experience at US community banks

The Bank of New York Mellon Corporation (BNY) has released the results of a 2024 survey of community banks that it conducted with the Harris Poll, a global market research firm.

The BNY Voice of Community Banks Survey polled key community bank decision makers, from CEOs and CFOs to executives responsible for adopting and implementing new technologies, across the US on topics including digital banking solutions they want to offer to customers and fintech collaborations they're pursuing that would help grow their businesses.

The survey found that over 90% of community banks surveyed said they are looking to initiate digital transformations. However, less than 20% see themselves as experts in data analytics - underscoring a challenge they face in launching a digital transformation program successfully.

Nearly 30% of those polled indicated that launching new technology services focused on efficiency and security, such as instant payments, are critical to maintaining a competitive edge. To be able to deliver these services effectively, 20% of banks surveyed are looking to collaborate with other companies over the next five years.

Among the community banks polled that are looking to expand their capabilities, 100% expressed a desire to provide wealth management services, and over 95% are interested in providing treasury services.

 

Millennium Consulting launches digital tax software for UK companies 

Unit4 Elite Partner, Millennium Consulting, has announced the release of its new Making Tax Digital (MTD) software, MVAT. This advanced MTD solution, specifically designed for Unit4 Financials by Coda customers, is recognised by HMRC and is designed to enhance the efficiency of VAT submissions.

As UK businesses focus on compliance and adopt MTD software, business leaders are actively seeking reliable solutions to ensure adherence and avoid penalties. Millennium Consulting’s latest MTD release builds on its reputation for developing cost effective software solutions for Coda Financials users.

Seamlessly integrated into Unit4 Financials by Coda, features of the new MTD release include an intuitive interface, automatic uploads of data from Coda, and tax codes mapped to VAT returns in seconds.

 

Relay Payments expands digital network

Relay Payments, a fintech focused on payments for the trucking and logistics industries, has announced its integration with Love's Travel Stops, broadening its fraud-free digital payment network. Since launching its fuel payments solution in 2023, Relay is now used by over 400,000 drivers and 100,000 carriers in the US for over-the-road payments, including fuel, scales, cash advances, and lumpers.

Adding Love's Travel Stops to its network, alongside Pilot, Maverik, Yesway, AMBEST, Onvo, and more, marks a step toward modernising over-the-road payments for the trucking industry. As a result of its rapid adoption, Relay says it has now processed millions of transactions with zero instances of fraud.

Using Relay for fuel payments provides carriers and drivers with a suite of over-the-road digital payments for fuel, scales, and lumpers that are designed to increase hours of service and improve the driver experience. There is also a 24/7, US-based customer service team that Relay says answers the phone in under 30 seconds.