Treasury Transaction Values Soar to $514B Amid “Peak Cash” Sentiment
Treasury transaction values among hedge funds and institutional managers soared to $514 billion in the first quarter of 2024, up 27% from the fourth quarter of 2023, as managers sought returns on excess cash amid ongoing rate cut uncertainty and “peak cash” sentiment, according to new Citco analysis.
The $514 billion was greater than any quarter last year, thanks mostly to large transactions in January and March that totaled more than $190 billion and were far in front of any month in 2023.
Citco, a global alternative investment asset servicer with over $2 trillion in assets under management, said widespread predictions of lower interest rates had driven market activity.
As a result, cash still has “plenty to offer” in this environment, Citco’s Middle Office Solutions team noted, with the $514 billion in settled transactions “far higher than levels seen in any quarter last year.”
Citco’s Middle Office Solutions report highlighted how managers have attempted to lock in higher rates during the current environment, as the Fed likely holds off on cutting rates for the time being.
“The data going forward will be crucial as investors weigh up whether we are in “peak cash” territory or not,” said Ryan Fitzgerald, head of Middle Office Solutions, Citco Fund Services. “Interest rates are almost certainly going to be on hold for longer, but a sharp fall in activity or inflation could quickly change the mood music for markets.”
Citco data shows that treasury payment volumes were stable, growing only 1% during the three-month period, but showing “significant” year-on-year growth compared to the same quarter last year.
The report also revealed a 33% increase in the number of listed trades matched, while stock swap volumes fell as managers focused on earning greater returns directly in the markets and reduced short positions. In addition, trading operations volumes increased by 17% overall, with both listed and FX trades contributing to this increase.