The investment environment for corporate treasurers in the US and Europe has seen marked changes in recent months, driven by shifting global liquidity preferences, monetary policy recalibrations and geopolitical uncertainties.
Insights from BNY’s iFlow technology, based on a dataset covering around 20% ($53.1tn) of the world’s investible assets offers a useful spotlight on how these trends are unfolding and what they imply for treasury decision-making.
One of the most pronounced developments has been a sharp global increase in cash demand. This move into cash has been broad-based and has not been sensitive to interest rate levels. This is a departure from traditional patterns, where higher-yielding currencies have attracted greater allocations. And interestingly, demand has increased across multiple currencies including euro, sterling and yen, not just the US dollar. This suggests that global investors, including corporates, are prioritising liquidity and safety over yield.
“For corporate treasurers, this translates into a more competitive environment for securing and maintaining cash,” says Geoff Yu, BNY’s senior EMEA strategist. “As such, liquidity strategies should now allow for global cash hoarding, which can reduce the availability of short-term instruments and increasing pressure on front-end markets.” This trend is also evident in the increased activity in short-dated government paper, T-bills and cash equivalents.
The data also suggests that, although the US dollar has shown some signs of weakening, there is no fundamental shift away from the dollar’s status as a global reserve currency
Another significant trend relates to the behaviour of the euro. Strength in the euro over recent months has been supported by increased onshore investment within Europe. European investors are deploying more capital domestically rather than seeking returns abroad. This shift is partially driven by fiscal and defence-related policy changes in countries like Germany, which have increased local government bond yields and encouraged investors to keep capital within the region.
The result is a rise in “home bias” and a temporary appreciation of the euro, although this may reverse as the European Central Bank begins to ease interest rates more aggressively in response to declining inflation.
The data also suggests that, although the US dollar has shown some signs of weakening, there is no fundamental shift away from the dollar’s status as a global reserve currency. As Yu says: “Investment flows into long-dated US treasuries even during periods of volatility confirm that, for many, the US remains a reliable safe haven.” However, European treasurers should pay attention to shifts in FX markets, as exchange rate movements are likely to affect hedging strategies and liquidity positioning.
European and UK interest rates appear to be on a downward trajectory, although the scope and timing could vary. The ECB is expected to continue easing and the Bank of England, having just reduced its own bank rate by 0.25 percentage points, may follow with further, precautionary, cuts depending on fiscal developments and economic data. While this easing trend should generally support liquidity and borrowing conditions for corporates, it also reinforces the importance of precise forecasting and investment timing.
Treasurers are adapting to an environment where elevated global risk aversion indirectly affects the cost and availability of liquidity
Another emerging trend is the focus on cash retention, or “sandbagging”, by corporates. With limited clarity about where markets are heading and few attractive reinvestment opportunities, many companies are holding on to more cash than usual. This caution reflects concerns about future uncertainty, where treasurers appear to be prioritising liquidity and flexibility, especially in sectors with greater exposure to macroeconomic shocks.
Data from iFlow confirms that recent liquidations were likely pulled from less liquid assets such as equities and corporate credit. “While corporate treasurers themselves are typically more conservative, they are operating within markets shaped by broader investor sentiment,” Yu says. “As such, treasurers are adapting to an environment where elevated global risk aversion indirectly affects the cost and availability of liquidity.”
Investment choices for European corporate treasurers remain relatively constrained and often focused on money market funds, cash and highly liquid instruments. Use of repo markets or equities is minimal, particularly for corporates with strict investment policies. Fixed income exposure, while possible, is generally approached with caution due to concerns about interest rate risk and credit quality.
The resilience of Middle Eastern markets, despite lower oil prices, has also been noted. Although direct cross-border flow data remains limited, signs indicate that the region has become more stable and less susceptible to boom-bust cycles than in previous years. For European treasurers with operations or exposure in the Middle East, this stability could present a more predictable environment for regional cash and FX management. The agreements signed between the US and the region’s major economies during President Trump’s recent visit will only reinforce the region’s integration into global liquidity pools.
Finally, supply chain security, both physical and financial, has grown in importance. Recent shocks have led corporates to revisit assumptions around supplier geography, funding stability and access to liquidity. Treasurers could now be building higher cash buffers, ensuring secure counterparty arrangements and maintaining more diversified access to liquidity in order to withstand future disruptions.
As a result, Europe’s corporate treasurers are now facing a recalibrated investment environment defined by high cash demand, declining rates, shifting FX dynamics and a renewed emphasis on resilience. Navigating this landscape will require more than traditional risk management; it will require strategic foresight and the agility to respond to fast-changing global conditions.
A good deal means different things to different people, but certainty is important, even if that means certainty that a deal will not take place, so that treasurers can plan and act accordingly
But above all, treasurers are craving certainty – in an era of threatened tariff hikes and subsequent deals, certainty is in short supply. As Yu says: “A good deal means different things to different people, but certainty is important, even if that means certainty that a deal will not take place, so that treasurers can plan and act accordingly.”
Mark Bellward is markets EMEA head of liquidity and margin services at BNY
BNY’s iFlow delivers insights based upon anonymised and aggregated flows, designed to provide market colour to investment practitioners across global financial markets. BNY’s market-leading strategists are able to present the latest intelligence drawn from iFlow, and their own, independent analyses. Insights can be accessed on iFlow or delivered by email each day. BNY’s Financing & Liquidity platform offers holistic solutions to help you operate more efficiently, diversify capabilities, make better-informed decisions and grow.