Leading issuers characterized by more active strategic work

An impending University of Chicago study shows municipal issuers that monitor cash and adjust cash forecasts on a daily basis have lower borrowing costs than those that don't.

DebtBook CEO Tyler Traudt reported the study results at The Bond Buyer's Southeast Conference Tuesday. DebtBook sponsored the study, which is in draft from now and is expected to be released shortly.

Having policies on the monitoring of holding of cash or the making of plans was found, surprisingly, to be negatively correlated with affordable borrowing costs. The vast majority of issuers have policies on cash and investing but what was found to be key was the issuers' actual practices.

The best performing issuers are much more likely to monitor cash daily and adjust their cash forecasts daily, Traudt said. These issuers also are more likely to forecast a year or more out.

Those issuers the study makers placed in the "leaders" category lost less money (as government issuers they didn't make profits), they had a lower portion of their funds in unassigned funds and a lower amount of liquidity. Trandt said these issuers used a greater portion of their money in long-term investments and benefited from this when they sought to borrow on the capital markets. The study shows the differences were highly statistically significant, which is a way of saying the outcome differences are highly unlikely to be due to chance.

Among AA-plus-rated issuers in the study, the leaders group borrowed at 15 basis points less than the "baseline" group. Among the AA-rated issuers the leaders borrowed at 10 bps less. The AAA group showed little difference.

In a second part of his presentation, Traudt said artificial intelligence is about to change all jobs in Treasury offices and lead to substantial productivity gains.

Currently about 50% of Treasury team time goes into data assembly, 30% to reporting and disclosure and 20% to strategic decision making, Traudt said. Routine work will soon be collapsed into seconds.

Public finance needs a purpose-built artificial intelligence on top of purpose-built, audited business logic, Traudt said. He said his company now provides this.

The system optimizes cash and investments, strengthens finances, closes compliance gaps, secures payments and transfers, informs stakeholders and motivates and empowers teams, Traudt said.

Artificial intelligence won't eliminate the Treasury department, he said. Rather it shifts work from operational to strategic and improves the impact of each public dollar.

Traudt said over 2,200 issuers use this DebtBook Capital Markets, with $540 billion in par outstanding. He said DebtBook is now leveraging this product to release a new product aimed at municipal advisors and underwriters.

The new product will simplify the use of data since the advisors and underwriters will no longer have to spend time entering the data. With permission, they can simply use data from the issuers.

The new system has datasets on multiple obligors filtered in various ways, market-wide data, a global refunding monitor, client profiles and full debt structuring models. Included is an artificial intelligence agent that can achieve a variety of public finance goals.

Artificial intelligence should be used alongside deterministic software, Traudt warned.