Companies Shift Cash Out of Treasurys as Fears Subside

August 7, 2013, 1:28 PM ET

Companies Shift Cash Out of Treasurys as Fears Subside

Companies moved money out of government debt and into commercial paper and corporate debt, as worries over Federal Reserve policy faded and treasurers showed a willingness to take on some risk to gain yield.

Click on the image above to view an interactive chart of corporate cash allocations.

U.S. Treasurys ended a three-month streak of increases in their share of corporate cash allocations, falling by 0.85 percentage point to represent 26.5% of corporate cash on August 1, according to data from Clearwater Analytics.

Corporate debt and commercial paper grew by .55 and .32 percentage point, respectively. Corporate debt remains the largest asset class among cash allocations, representing one-third of the total.

Worries that the Fed would reduce its bond-buying program prompted credit spreads to widen in May and June, said Rhet Hulbert, a portfolio manager at Clearwater Advisors LLC. But last month, he said, “the market settled, recognizing an over-reaction.”

Mortage-backed securities grew by .21 percentage point to 3.5% of all cash allocations.

“Mortgages had been underperforming other asset classes recently,” Mr. Hulbert said, “but investors in July moderated their views on risk and interest rates and moved some assets back into the space.”

Other asset types were mostly stable last month. Both agency bonds and CDs sank by 0.16 percentage point, but all other asset classes shifted less than 0.1 percentage point in July.

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