Corporate Treasury and Funding

The corporate treasury user has a straightforward mandate: to seek lower interest rates on borrowing, and highest return at acceptable rates of risk on free cash. The treasury function may also seek to isolate the business functions from rate volatility and currency exposure. Treasury functions are also seeking specific maturity dates to match known funding needs, project timelines, or other cash outlays. The treasury function will seek instruments to exchange fixed for floating rates as well as floating for floating, in some cases to manage corresponding currency risk and differences in rates among different countries in which the entity operates.

The treasury may also seek hedges to minimize the volatility of debt repayment, bond obligations or other fixed outlays against borrowed capital. Further, corporate treasury functions may also have short term funding requirements met by commercial paper issues, which they may want to hedge against rate fluctuations. Depending on the scope and breadth of commercial activities, treasury functions may at times apply the full range of interest rate derivatives.