Most treasurers probably headed into 2004 with a cash management plan based on one key assumption: U.S. interest rates would be heading upward–probably to top 5% at some point during the year. That held all the usual implications: higher borrowing costs, higher potential returns on fixed-income investments and a healthier economic climate.

Instead, rates defied expectations and headed lower during the first quarter. While the consensus forecast called for the 10-year Treasury yield to move up to 4.8% by midyear and 5.2% by year end, so far it has been headed in reverse. By March 15, it had slipped to 3.77%, from 4.26% at the end of 2003, as the markets' faith in the economic rebound took some hits, particularly from the anemic monthly gains in employment and renewed concerns about terrorism in the wake of the Madrid train bombing.

Are treasurers in a position to take advantage of the turn of events? Whether a corporate borrowing surge will materialize is uncertain. Despite forecasts for a 10% rise in capital spending this year and signs that M&A activity is picking up, John Lonski, chief economist at Moody's Investors Service, says data that shows non-financial companies with high cash flows relative to their outlays implies that corporate borrowing may not take off in a big way.