AFP Blogs

The general counsel of the U.S. Commodity Futures Trading Commission, corporate treasury and finance executives from Verizon and Tiffany & Co., and legislators are slated to speak at an OTC derivatives reform update hosted by AFP.

CFTC General Counsel Dan Berkovitz, Verizon Director of Investment Strategy and Risk Management Neil O’Sullivan, CTP, and Tiffany & Co. VP Treasurer Michael Connolly will offer their perspectives on proposed OTC derivatives reform currently before Congress, December 7, in New York City. Registration is free, but seating is limited. The three-hour event starts at 8 a.m. at the Roosevelt Hotel in midtown Manhattan. This event is approved for three CTP/CCM credits.

AFP staff also will host an update and open forum on OTC derivatives reform in Chicago on December 4. Registration is free, but seating is limited. The three-hour event starts at 8 a.m. CT and is at the Hyatt Regency O’Hare.

“The situation around OTC derivatives reform is extremely fluid so these events are very timely,” says Brian Kalish, AFP Director, Finance Practice Lead. “It’s important for corporate treasury and finance executives to understand where we’re headed, and it’s an opportunity for legislators and regulators to hear from corporate end users.”

For more information about both OTC derivatives events contact Julianne Franck.

Global Capital Markets

Boeing Co. and Morgan Stanley led U.S. corporate bond sales of about $27.5 billion this week as borrowers closed in on record issuance for the year.

Boeing sold $1.2 billion of notes, and Morgan Stanley, issued $2 billion of debt. Companies have sold $1.16 trillion of U.S. corporate bonds in 2009, compared with the 2007 record of $1.17 trillion.

The difference between investment-grade bond yields and Treasury issues narrowed 1 basis point this week to 215 basis points, the tightest since Jan. 8, 2008.

Royal Bank of Scotland Plc, sold $7 billion of debt due in March 2012, equaling the largest U.S. corporate sale since May.

GE Capital Corp., plans to issue sukuk bonds regularly following its debut offer in the Shariah-compliant debt market.

China’s Ministry of Finance will sell 50-year bonds for the first time next week.

Vietnam plans to fund energy projects with a $1 billion bond, its first since an inaugural sale in 2005.

U.S. Treasuries

Treasury two-year note yields touched the lowest level this year. The two-year touched 0.67 percent, the lowest level since December.

Three-month bill rates turned negative for the first time since last year’s credit freeze.

Swaps

Interest-rate swap spreads widened as yields on U.S. Treasuries declined as a slide in stocks damped demand for higher-yielding assets. 

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Canadian Finance Minister Jim Flaherty has proposed a voluntary code of conduct for the credit and debit card industry in Canada amid ongoing discussions with merchant and consumer associations there. The proposed rules are meant to provide pricing flexibility and transparency for merchants who accept payment cards.

“This proposed Code is intended to promote fair business practices and ensure merchants and consumers clearly understand the costs and benefits of credit and debit cards,” Flaherty said in a release. “By making clearer information available to consumers and encouraging fairer business practices, our Government is taking unprecedented steps to protect Canadian consumers.”

Canada’s Finance Department is encouraging stakeholders in the debate to e-mail comments on the proposed code to codeconsult@fin.gc.ca. The comment window lasts 60 days.

Under the code’s “recommend policy elements,” merchants would receive at least 90 days notice before fee changes. Another provision says merchants would not be obligated to accept credit and debit cards from the same network. Merchants can accept only a network’s credit card, for example, without being required to also accept its debit card. Also, discounts will be allowed for any payment method, meaning merchants could incentivize cash payments. And issuers would only provide premium cards, which can cost more to accept, to consumers who ask for them, under the rules.

“I welcome input in the process to ensure the proposed Code ultimately meets its goals,” Flaherty said. “The Government supports efforts that encourage a competitive environment which provides for fair pricing practices, innovation, a safe and secure payment system, and high quality services for consumers and merchants.”

Read more on Canada’s proposed rules in upcoming issues of AFP’s monthly Payments newsletter.

When it comes to hedging, don’t make assumptions about what you think senior management wants, or about what the financial markets will do. That’s the advice from Lilly Palmieri, an institutional investment consultant with Rogerscasey. Palmieri will lead AFP’s Financial Risk Management Seminar, December 2-3, in New York City.

“I have seen examples of treasury personnel executing hedging strategies that they believe are conservative and in line with overall management policy, but without knowing what management was measuring them against,” she says. “If there are various alternatives, communicating the decision-making process in advance gets buy-in.”

What attendees will get from the financial risk management seminar:
• A process to consider as they look at treasury operations
• Tools to identify and manage treasury risk issues
• Resources to continue developing their quantitative and qualitative skills
• Case studies with answer sheets and highlighted concepts and computations
• Application-focused checklists
• AFP’s Risk Management: A Risk Mapping Guide.

Register for the seminar here.

This seminar is approved for up to 11 CTP/CCM and CPE credits.

The U.S. Government Accountability Office, the investigative arm of Congress, has released its much-anticipated report on interchange fees. Each time a customer uses a payment card to make a purchase, the card issuer takes a cut (the interchange fee), typically in the amount of 1 to 3 percent of the total purchase price. For businesses large and small, the fees have caused headaches. Accepting cards means increased sales. But the cost of those sales often outweighs the benefits. And rejecting popular cards isn’t simple. The GAO addressed those points up at the top of its report, which you can read here. (It’s a 69-page PDF.)

For merchants, the benefits of accepting credit cards include increased sales and reduced labor costs. However, representatives from some of the large merchants with whom we spoke said their increased payment costs outstripped any increased sales. These merchants also reported that their inability to refuse popular cards and network rules (which prevent charging more for credit card than for cash payments or rejecting higher-cost cards) limited their ability to negotiate payment costs. Interchange fees are not federally regulated in the United States, but concerns about card costs have prompted federal investigations and private lawsuits, and authorities in more than 30 countries have taken or are considering taking actions to address such fees and other card network practices.

We will have more on interchange fees and this GAO report in upcoming issues of our monthly Payments newsletter and Exchange magazine. Subscribe to Payments to have the bulletin - which includes features on emerging payments issues and Q&As with payments newamakers – delivered to your inbox each month.

The Association for Financial Professionals invites corporate treasury and finance practitioners, consultants, experts and bankers to apply to lead an educational session or workshop at its 2010 Annual Conference in San Antonio, TX, November 7-10.

The AFP Annual Conference is the most important event in corporate treasury and finance. More than 4,000 CFOs, VPs of finance, controllers, treasurers, assistant treasurers, finance directors, cash managers, financial analysts, service providers, bankers and product managers attend over 100 sessions and workshops. The AFP Annual Conference provides unbiased content for attendees to learn best practices from their peers and top experts.

Topics include:
• Bank Relationship Management
• Working Capital Management
• Trade and Supply Chain Finance
• Cash Flow Forecasting
• Cash and Liquidity Management
• Credit
• Capital Markets
• Investments
• Capital Structure
• Pensions
• Accounting
• Technology and Innovation
• Career Development

To apply, click here. Deadline for proposals is January 10, 2010.

There’s been a lot of talk on AFP discussion lists about remote deposit capture risk management. With that in mind, the next issue of AFP’s Risk newsletter delves into the topic. In the meantime, Bob Meara, a senior analyst with Celent who authored a report on RDC risk best practices, offers some advice for corporate practitioners:

o Establish a deposit review process if dollar amounts warrant. Most solutions allow separate scan and review/submit user entitlements.
o Use reporting, particularly available reporting that invites review of items that have been corrected.
o Safeguard original items until destruction.
o Use RDC to reduce the number of required DDAs and bank relationships, if applicable.
o Consider use of remote cash capture alongside RDC for businesses that receive meaningful cash to achieve the reduction in bank relationships, reconciliation costs and cash transportation charges.

PayItGreen – a NACHA-lead coalition promoting the environmental benefit of choosing electronic payments, bills and statements over paper – is now registering members of all sizes. The three-tiered membership program, along with a new Web site, debuted in September after a soft launch at NACHA’s Payments conference in April.

“In order for the program to really expand and grow and frankly be self sustaining a membership program was developed,” said Samantha Carrier, NACHA’s senior director for advanced payment solutions.

Membership dues range from $500 a year for entry-level memberships to $25,000 for founding members. Businesses that sign up will have exclusive access to PayItGreen’s logo, and at the premier ($6,000 a year) and founding levels, can download PayItGreen resources such as calculators and videos for use in their own outreach efforts. Founding members have access to co-branded tools and resources.

Visit PayitGreen’s Web site for more information about becoming a member. Also there you can find news, videos, statistics, case studies, a list of current members and calculators to determine the environmental benefit of eliminating paper in the payroll, payments and billing processes.

Subscribe to AFP’s Payments newsletter to receive a monthly bulletin featuring coverage of payments news and issues, such as how green-ing your payments processes can pay dividends. Read the November newsletter here.

Global Capital Markets

Borrowers sold $6.3 billion of U.S. corporate bonds that mature in 30 years or more, the biggest weekly total since January.

Banks are carrying more short-term debt on their balance sheets than at any time in at least 30 years. About $10 trillion of bank debt will come due between now and 2015, with $7 trillion maturing by 2012.

U.S. Treasuries

Treasuries headed for a weekly gain after the U.S. completed the sale of $81 billion of notes and bonds amid speculation the Federal Reserve will keep interest rates near record lows for the foreseeable future.

Commercial Paper Update

The U.S. CP market shrank for a second straight week, stalling a three-month expansion. For the week ending Nov. 11, the CP market fell $76.6 billion to $1.239 trillion outstanding from $1.315 trillion the previous week, Federal Reserve data showed.

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Some financial professionals have reported receiving an e-mail appearing to come from NACHA that is actually a fraudulent phishing message. The e-mails have “Rejected ACH transaction” or “Your ACH transaction was rejected” in the subject line and a link to an “Unauthorized ACH Transaction Report” in the body of the e-mail. NACHA, which issued an alert today about the scam, warns to not click on the link, which routes to a fake Web site where downloadable malicious sofware may be waiting.

 Here’s how the e-mail appears, this one with the link deactivated:

From: nacha.org [mailto:report@nacha.org]
Sent: Thursday, November 12, 2009 10:25 AM
To: Doe, John
Subject: Rejected ACH transaction, please review the transaction report

Dear bank account holder,

The ACH transaction, recently initiated from your bank account, was rejected by the Electronic Payments Association. Please review the transaction report by clicking the link below:

Unauthorized ACH Transaction Report