debt

With high rates here to stay, CFOs rely on internal cash and working capital for stability.

In August, U.S. Treasury yields reached multi-decade highs. Treasury Secretary Scott Bessent responded by doubling the size of buyback operations for 10- to 20-year and 20- to 30-year securities to a floor of $4 billion each, effective Sept. 9 — a stopgap lasting through November 4, when the Treasury releases its next official policy statement.

Yet while Washington intervenes to stabilize government debt, finance chiefs must reckon with higher costs of capital.

“Higher rates have changed the math and, more importantly, reduced the margin for error,” Thomas DeFabrizio, CFO, Americas at Impellam Group, said in an email. “The hurdle rate should move when the cost of capital moves. Otherwise, you are pretending the financing environment has not changed.”

This reality is forcing companies to look inward, turning operational efficiency into a primary source of funding. “Every dollar released from receivables or inventory is a dollar you do not have to borrow at today’s rate,” DeFabrizio said — a meaningful gap when investment-grade credit is yielding around 5.5% and broad high-yield debt is near 7%, with lower-rated credit running considerably higher.

“That makes working capital much more than a finance housekeeping exercise,” DeFabrizio added. “It becomes a capital-allocation decision.”

Era of Cheap Capital Ends

Elevated borrowing costs directly filter down into corporate balance sheets and consumer demand, sparking broader concerns over whether public and private debt issuance has reached a tipping point. Rather than waiting for a rate relief cycle that may never materialize, finance leaders are taking direct defensive action.

Duncan Young, principal at San Francisco-based consulting firm Saorsa Growth Partners, specializes in providing fractional CFO services to companies. Businesses, he told Global Finance via email, are now prioritizing balance sheet durability over aggressive expansion.

To hedge against benchmark rate risks, companies are restructuring their short-term obligations and shifting benchmark exposure.

“This is likely a function of risk-off bondholders and bank balance sheets, shifting away from Treasuries towards corporates. We’re pricing off SOFR when possible, to avoid the Treasury rate risk,” he said.

Instead of speculating on interest rate cuts, companies with near-term debt maturities are moving quickly to lock in fixed terms to insulate themselves from further upside volatility in yields.

“Our ‘current debt’ revolvers are being paid back [or] termed out to give us more resilience, heading into uncertainty. We aren’t expecting yields to ease,” Young said.

That posture is showing up across the broader CFO community.

Companies Are ‘Stretched Thin’

Middle-market companies, firms that typically generate less than $1 billion in annual revenue, have even less room to maneuver. Nick Araco, CEO of CFO Alliance, hears that many CFOs “are stretched thinner on what their current options are.”

As a result, they’re watching the Federal Reserve more closely, he added. “They don’t have the same flexibility to just refinance on their own timeline.”

“The ones sitting on debt maturing in the next 12 to 24 months are largely not betting on yields easing meaningfully,” Araco said, describing conversations across the group’s roughly 9,000 members.

This conservative stance is fundamentally altering capital allocation strategies. Rather than relying on leverage to fuel aggressive top-line targets, firms are relying on internal cash generation. They’re scaling back capital expenditures and holding cash as a strategic buffer.

“Return on cash gives us some benefit — for example, it softens the opportunity cost of us paying off debt. Terming out on a fixed rate and sitting on the cash so we can stay liquid in the next liquidity crisis is insurance worth paying,” Young added. “Given the AI outlook and the consequences of a bubble pop, we’re prioritizing resilience over growth rate, and this means less leverage and a more liquid balance sheet.”

Preparing for Double Shock

Government debt continues to test the limits of market capacity. An August 30-year Treasury auction drew below-average demand and record dealer absorption as yields hit 5.2% — the highest since 2001. Meanwhile, foreign investors’ share of U.S. debt has slid to about 30% from a 2008 peak of 49%, according to the Committee for a Responsible Federal Budget and the Bipartisan Policy Center.

That combination — elevated base yields sitting alongside historically tight credit spreads — is unsettling CFOs more than the headline numbers suggest.

“Tight spreads feel almost like a false sense of calm,” Araco said. CFOs aren’t treating today’s all-in cost of debt as the new normal, he added. They’re stress-testing what happens if spreads normalize on top of already-elevated base rates.

“It’s less about action today and more about scenario planning,” Araco said, “and making sure that their capital structure isn’t fragile if that spread compression reverses.”

Corporate leaders are taking matters into their own hands. By prioritizing liquidity, extending duration, and managing leverage, CFOs are ensuring their organizations remain resilient regardless of where government bond yields head next.

“If Treasury yields remain elevated and spreads widen at the same time, the all-in borrowing cost can change quickly. I would model that combined shock now,” DeFabrizio warns. “Once you need the capital, your negotiating position has already changed.”

Anthony Noto covers corporate finance and private credit. Contact him at anoto@gfmag.com

European CFOs must adjust as the region’s biggest pension buyer of long-dated debt cuts back.

This article appears in the September 2026 issue of Global Finance Magazine.

The Netherlands pension system is beginning to reduce one of Europe’s most reliable sources of demand for long-dated debt as a broad regulatory shift changes how Dutch pension funds manage their assets and liabilities. ING Groep NV estimates that nearly €600 billion ($699 billion) of assets have already been affected by the change, with more than €900 billion expected to follow early next year.

Under the old defined-benefit pension system, Dutch funds were required to hedge the interest-rate sensitivity of long-term pension liabilities by using long-dated bonds and swaps to match assets with payments extending decades into the future. Under the new defined-contribution model, which became law in 2023, that liability matching requirement has been significantly reduced, allowing funds to carry less duration and scale back their long-term hedges, resulting in less structural demand for the longest-dated debt and swaps.

For European CFOs, this could mean a higher premium for 20-, 30- and 50-year borrowing as companies and governments compete for a smaller pool of long-duration investors.

The change “should reduce structural demand for long-end duration assets and support curve steepeners over the long-term horizon,” wrote Sara Adjir, senior vice president and portfolio manager, and Jeroen van Bezooijen, account manager, at Pacific Investment Management Co., in a research note. They expect the impact will be mostly concentrated in 50-year swaps, but will also be felt in the demand for 20- and 30-year euro swaps and government bonds, including German and Dutch debt.

Deadlines

The Netherlands runs Europe’s largest pension system, with roughly €1.6 trillion in assets, and every fund must complete the switch by January 2028. Dutch pensions have long dominated the market for European long-dated debt, holding around €88 billion of interest-rate swaps maturing beyond 25 years at the end of last year, roughly a quarter of the total.

The first major wave of the transition came on Jan. 1, when 24 funds converted, among them the healthcare scheme PFZW and the metals scheme PMT, with an estimated €550 billion to €600 billion of pension assets between them. Analysis by the Netherlands central bank shows that Dutch pensions bought almost €34 billion net of swaps maturing inside 25 years while selling more than €12 billion of longer-dated ones. 

The bigger test, however, comes when more than €900 billion of pension assets is scheduled to convert on Jan. 1, with the Dutch civil service scheme ABP accounting for about €530 billion of that. 

The shift does not mean long-dated Dutch debt is suddenly becoming illiquid or even hard to sell: “Overall, we still see strong demand for our 30-year bond. Remember, we are AAA,” said Saskia van Dun, director of the Dutch State Treasury Agency.

Sovereign Issuers Adjust

Data indicates that sovereign borrowers are already adjusting to the change.

The share of Netherlands government bonds sold at maturities beyond 10 years fell from 42% at the start of 2025 to 31% by the third quarter, according to the Organization for Economic Co-operation and Development (OECD), which calls the constraint on long tenors structural. The OECD expects eurozone debt agencies to sell a record €1.35 trillion of medium- and long-term bonds this year into that thinner pool of demand.

For European finance chiefs, however, times are changing. For two decades, long-dated bond demand was unusually deep and predictable. As it recedes, the shifting cost of locking in 20 or 30 years of funding could become a live question.

Thomas Monteiro is a contributing writer based in Spain.