Date: 16 June 2026
If you haven’t carried out a thorough review of your corporate treasury strategy in the last few years, now is likely a good time to do so.
Why?
Because much has changed in the global economy over the past few years, and the changes are, if anything, coming thicker and faster. Arguably one of the most important changes, from the perspective of a corporate treasurer, is the ongoing debasement of global currencies, whose effects are being felt by everyone, from individuals in their pay packets and household bills, to global businesses finding that their cash balances don’t stretch as far year on year.
This trend has become so important that it has even given rise to a phenomenon known as the ‘debasement trade’. As Bloomberg reports, its effects are causing all sorts of problems for governments and central banks as they struggle to tame the inflation they themselves unleashed:
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Those who believe in (the debasement trade) are pulling away from sovereign debt and the currencies they are denominated in, fearful their value will be eroded over time as governments avoid tackling their massive debt burdens and even seek to add to them.
- Further fuel is coming from speculation that central banks will face increasing political pressure to hold down interest rates to offset what governments owe, and in the process fan inflation by continuing to crank out cash.
We have already seen early signs of massive fiscal expansion in the US, Japan, Germany and China while many of the countries facing towering fiscal cliffs, such as France and closer to home, here in the UK, are struggling to even trim their budget deficits. If these trends continue, as seems highly likely, holding cash or even short-term bonds will become even more of a losing proposition.
It may be that some corporate treasurers may prefer the gradual loss in purchasing power of holding cash (even with interest), over the greater volatility of holding other assets (even if these assets are likely to provide an improved ‘real’ return over time). But that is, we believe, an active choice corporate treasurers should understand and articulate, not a passive one. It shouldn’t simply be the default approach based on received wisdom.
Gold’s resurgence
The spectre of gold reaching new all-time highs earlier this year - and broadly doubling in price over the 12 months from Jan ’25 – Jan ‘26 - is a reminder of just how quickly global currencies, including, crucially, the US dollar, are falling in value, despite the more recent weakness in price.
In recent months, central banks' combined gold reserves reportedly surpassed their holdings of US Treasuries for the first time since 1996, a shift driven by a long-term diversification strategy away from dollar-denominated assets due to concerns over US debt, geopolitical risks and dollar stability.
For the first time in three decades, sovereign bonds are no longer the safe haven of choice for central banks, the very institutions that have overseen the decades-long debasement of national currencies. It’s not just central banks that are buying gold hand over fist; so too are large institutional investors, and retail investors.
Fiat currencies losing trust
Gold’s aggressive price rise arguably reveals a growing lack of confidence in fiat currencies as standalone assets. The major turning point was the decision by the US and its European allies, in early 2022, to weaponise the dollar and the euro by confiscating several hundred billion dollars of Russian assets held overseas, in retaliation for Russia’s invasion of Ukraine.
The result was a stampede by central banks and investors out of Western assets and currencies, and into gold. In a survey from last year by the World Gold Council, 76% of the central banks said they expected their gold holdings to be higher in five years. Likewise, nearly three-quarters of respondents expected central banks' dollar-denominated reserves to be lower in five years.
Another major concern in global markets is the role of leverage in fuelling asset bubbles. The implosion of First Brands, a US automotive parts company, due to the unravelling of its multiple layers of off-balance-sheet debt from working-capital finance manoeuvres, has fuelled fears about the quality of credit in the US and the levels of leverage in financial markets in general.
New crises looming?
That collapse has already left big investors like Blackstone and PGIM, as well as major banks like Jefferies, nursing big losses. It has also prompted concerns about the balance sheet health of some US regional banks, with memories still fresh of the bank collapses in 2023. Many of these lenders are heavily exposed to commercial real estate and other high-risk sectors in the US.
There are also concerns about the amount of leverage underpinning the AI bubble, with some analysts warning that a resulting stock market crash could spark a recession, if not a full-blown crisis. If, indeed, there is another crash and/or banking crisis, the central banks will almost certainly respond with massive bailouts, which will further depreciate global currencies, further diluting the value of treasury cash positions.
Navigating new realities
In summary we believe the debasement trade is almost certainly here to stay, and that is why now is the time for corporate treasuries to review their strategy. And this isn’t just a refresh, it is a back-to-basics fundamental rethink of what treasury assets are being held for, and what risks are being accounted for. This is particularly true if the lion’s share of your company’s funds is kept in cash or short-dated bonds for long periods of time.
The good news is that there are inflation-beating alternatives available to corporates. Equities - which have broadly delivered 9% pa over the long term – are one, giving a greater potential to maintain (and grow) real purchasing power.
Another option could be to hold some exposure to gold and/or bitcoin; gold being a widely acknowledged, and long standing, inflation hedge and bitcoin being an emerging - and increasingly used - store of value. The latter has the added benefit of being easily transmitted across the globe, at very low cost. In today’s world of increasingly decentralised finance, corporations are less constrained by traditional boundaries such as geography, jurisdiction or local currency. In short, the world is growing smaller.
The options to protect the real value of treasury assets are countless. Treasurers must view their assets and their strategy through various lenses in order to build optimally resilient treasury structures, for the benefit of their stakeholders. And, the time to review is now.
