Mid-Year Treasury Reset: Positioning for the H2 Rate Path

Where Rates Sit at the Reset Point

Our June piece on working capital under BoE rate cuts anchored the base rate at approximately 3.25 per cent following two cuts through Q2. The forward curve as of mid-July continues to price further cuts through H2, with market-implied terminal expectations in the 2.75 to 3.00 per cent range by end of 2026. Rates are moderating but not collapsing; corporate treasury is operating in a specific window where yield is meaningful but no longer generous.

For a growth-stage fintech CFO with £5 to £50 million of cash on balance sheet, this window matters. The absolute yield on well-managed cash is not immaterial, but the incremental yield gain from active management is smaller than it was at the 2023 peak. The right question is no longer "how do we squeeze the most yield out of the cash", it is "does our current treasury framework still make sense".

Decision One: Cash Tranche Sizing

The three-tranche framework — operational liquidity, tactical reserve, strategic reserve — remains the correct architecture. What changes at mid-year is the size of each tranche.

Three inputs drive the sizing:

• Operating cash burn. The current monthly cash burn from the H1 actuals, not the plan from January.
• Working capital seasonality. Any specific H2 timing effects (VAT payments, tax payments, seasonal customer activity, year-end payroll).
• Runway cushion. The target runway that management wants to preserve, taking into account fundraising planning and rate-of-cash-consumption stress cases.

Decision Two: MMF and Instant-Access Selection

Sterling Money Market Funds remain the workhorse of the operational and tactical tranches. Two decisions worth revisiting at mid-year:

Provider Yield Comparison

MMF providers pass through rate changes at different speeds and with different management-fee drags. Compare the effective yield being received from your primary MMF against two or three peers over the past three months. Differences of 20 to 40 basis points across peers are normal, and moving to a higher-yielding fund is often straightforward once the operational plumbing is set up.

Instant-Access Alternative

For firms with an existing banking relationship, instant-access business savings accounts have become more competitive as banks compete for deposits in a moderating rate environment. Some accounts now match or exceed short-duration MMF yield with the advantage of being on the bank's balance sheet (relevant for firms managing counterparty concentration). Check quarterly.

Decision Three: Duration in the Strategic Reserve

The strategic reserve — cash unlikely to be needed within six months — is where duration decisions get made. In a falling-rate environment, there is a case for locking in current rates through short-duration gilts or short-duration gilt funds, since reinvestment risk means later cash will earn less than current cash.

The counter-case is that duration extension increases mark-to-market volatility if rates surprise in either direction, and reduces optionality if operational cash needs turn out to be more variable than planned. For a growth-stage fintech, this argues for modest duration extension — three to nine months typical, not the two-to-three-year duration that a corporate treasury might contemplate.

The specific mid-year action for the strategic reserve is to check:

• Current allocation between overnight and duration.
• Reinvestment date of any T-bills or gilt positions maturing in H2.
• Optimal reinvestment strategy given the forward curve.

Decision Four: Hedging Exposure

Foreign currency exposure often accumulates through H1 without being actively managed. For a fintech with meaningful non-sterling revenue (US customers) or non-sterling cost (US vendors, cloud infrastructure), the mid-year reset should assess:

1. Current natural offset. Where dollar revenue meets dollar cost, no hedging is needed. Quantify the natural offset before considering additional instruments.
2. Residual net exposure. The dollar (or euro) revenue net of dollar (or euro) cost — this is the amount that needs a decision.
3. Hedging policy vs opportunistic action. A policy-based approach (hedge 50 to 70 per cent of forecast net exposure 6 to 12 months forward) beats opportunistic action for most firms. Boards prefer to see the policy in place.

The Board Briefing

For the July or August board meeting — typically the first meeting of H2 — the treasury reset should be a specific agenda item, not tucked inside the mid-year forecast discussion. A one-page brief covering:

1. Where the base rate is and the market-implied path through H2.
2. The revised tranche sizing (with reasoning where changed).
3. MMF and instant-access positioning, with year-on-year yield comparison.
4. Duration in the strategic reserve — target and current.
5. FX hedging policy and any specific decisions taken.
6. The interest income forecast for H2 under two rate scenarios (base and lower).

Six items on one page. The board should be able to read and challenge the reset in fifteen minutes; it should not take a treasury deep-dive to be understood.

Key Takeaways

• Mid-year is the natural checkpoint for the treasury framework agreed in January. With H1 actuals in and the forward curve visible, four decisions merit revalidation.
• Cash tranche sizing: check that operational liquidity is at least twice the largest single-month H1 working capital swing. Under-sizing risks unplanned RCF draws.
• MMF and instant-access selection: compare provider yields; instant-access business savings accounts have become more competitive against short-duration MMFs.
• Strategic reserve duration: modest extension (three to nine months) is defensible in a falling-rate environment. Full-cycle duration extension is not typical for growth-stage fintechs.
• FX hedging: quantify the natural offset between currency revenue and cost, then apply a policy-based approach to residual net exposure (50 to 70 per cent hedged 6 to 12 months forward is a common baseline).
• Board briefing: one page, six items — rate environment, tranche sizing, MMF positioning, duration, FX policy, interest income forecast under two rate scenarios.
• The mid-year reset takes half a day of finance-team work; skipping it means running H2 on a January plan that six months of data has already shown does not quite fit.