Week 6 Discussion 2

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University Of Arizona *

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Economics

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Feb 20, 2024

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As the Cash Manager for a multinational corporation headquartered in the United States, the choice to invest in New Zealand with a 4.5% yield as of February 1, 2024, for one year is guided by a strategic analysis of key factors. Leveraging the low risk associated with government bonds, I will evaluate treasury bills across several leading government markets to pinpoint the best investment option, adhering to the guidelines proposed by Block et al. (2022). This assessment is concentrated on identifying the most secure and stable government security for our investment strategy. New Zealand offers an attractive investment landscape due to its stable economic environment, well-regulated financial markets, and historically sound fiscal policies. The country's economic resilience, supported by sectors such as agriculture and tourism, enhances the appeal for secure investments, as Dun & Bradstreet (2019) stated. Moreover, New Zealand's relatively high interest rate, represented by the 4.5% yield as of February 1, 2024, presents an opportunity for our treasury cash to generate a favorable return Bloomberg (2024). The decision is influenced by the expectation that New Zealand's economy will continue to perform well, and the central bank is likely to maintain a prudent monetary policy, supporting a positive yield outlook for the following year. This higher yield maximizes returns for our treasury cash and diversifies the investment portfolio, mitigating risks associated with relying solely on domestic investments. The anticipated trajectory for the New Zealand 10- year Government Bond Yield suggests a projection of 4.55 percent after the current quarter, as indicated by both Trading Economics global macro models and analysts' forecasts. It is estimated to trend at 4.39 percent within the next 12 months, as Trading Economics (2024) suggested. In summary, New Zealand's choice aligns with a prudent approach to treasury management, seeking both stability and an attractive yield for the multinational corporation's financial assets. References Block, S. B., Hirt, G. A., & Danielsen, B. R. (2022). Foundations of financial management. McGraw Hill. Bloomberg. (2024, February 1). Markets: Rates & Bonds. https://www.bloomberg.com/markets/rates-bonds Dun & Bradstreet (2019). Country Insight Report: New Zealand Trading Economics. (2024, February 1). New Zealand 10-Year Government Bond Yield. https://tradingeconomics.com/new-zealand/government-bond-yield#:~:text=The%20New %20Zealand%2010%2DYear%20Government%20Bond%20Yield%20is %20expected,4.39%20in%2012%20months%20time .

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