Best CD & MM Rates Thread 2019 - Please post updates here

[copyright1997reloaded]

Quote:

Originally Posted by njhowie Why don't you do a small portion of what you're considering purchasing right now (maybe 1 bond worth) to get the link all set up, then do the rest later in the month as you contemplate? If you're considering purchasing on the order of $10,000, for example, you're sacrificing less than $10 from your 2.5% money market account by moving the money now versus 2 weeks from now.

$10 is $10. I'm cheap that way. That's why I am a participant on this forum.

But you are right, and I was considering doing a test buy, which would be the smart thing to do.

[audreyh1]

Quote:

Originally Posted by Golden sunsets Have you been paying taxes on the interest annually or will you be hit with a big tax bill when you liquidate your older bonds?

I will be hit with the tax bill when I liquidate. But I can stagger the redemption over multiple years for tax purposes as long as I do it before the bond matures. Or I can take the hit all at once.

This doesn’t concern me.

[dvalley]

So many years ago I looked into I-Bonds but never really found the appeal, however, based on audrey's post it seems like it might be a good buy this month. Currently I have my 'liquid savings' in a MM account earning approx 2.5% waiting for a good buying opportunity if the stock market dips. I think I can part with $10k and put it into the I-Bonds to buy it as a gift for college education for my kid (in about 6yrs). It says no taxes if you use it for higher education. Does that sound like a good decision? Also, must I use my kid's SS# to purchase and whatever SS# you purchase it with is the only person who can cash them?

EDIT: Found this from the depositaccounts article:

Quote:

Below is an estimated annualized return for I Bond redemption from April 1, 2020 to July 1, 2020. It is assumed you will buy the I Bond on April 30, 2019 which gives you almost an extra month of interest. This effectively reduces the 3-month penalty to 2 months. 2.06% - redeem on 4/1/20, 6mo of 2.83%, 3mo of 1.90%, and 3mo of 0% (penalty) 2.05% - redeem on 5/1/20, 6mo of 2.83%, 4mo of 1.90%, and 3mo of 0% (penalty) 2.04% - redeem on 6/1/20, 6mo of 2.83%, 5mo of 1.90%, and 3mo of 0% (penalty) 2.03% - redeem on 7/1/20, 6mo of 2.83%, 6mo of 1.90%, and 3mo of 0% (penalty)

So sounds like the one yr return from the MM rate is better than the I-Bond's? Am I missing something?

[copyright1997reloaded]

Quote:

Originally Posted by dvalley So many years ago I looked into I-Bonds but never really found the appeal, however, based on audrey's post it seems like it might be a good buy this month. Currently I have my 'liquid savings' in a MM account earning approx 2.5% waiting for a good buying opportunity if the stock market dips. I think I can part with $10k and put it into the I-Bonds to buy it as a gift for college education for my kid (in about 6yrs). It says no taxes if you use it for higher education. Does that sound like a good decision? Also, must I use my kid's SS# to purchase and whatever SS# you purchase it with is the only person who can cash them? EDIT: Found this from the depositaccounts article: So sounds like the one yr return from the MM rate is better than the I-Bond's? Am I missing something?

1) No state taxes on savings bond interest.
2) iBond interest is tax-deferred for up to 30 years
2) one year does not a lifetime make. The iBond will return 0.50% real over the life of the investment. (Well, somewhat of a lie in that federal taxes still need to be paid.)

A long long time ago there was a period where TIPS and iBonds had a near 4% REAL (plus inflation) return. I was smart enough to buy some of these, but not smart enough to buy a sh*t load of them.

[audreyh1]

Quote:

Originally Posted by dvalley EDIT: Found this from the depositaccounts article: So sounds like the one yr return from the MM rate is better than the I-Bond's? Am I missing something?

The thing is, you know what a money market fund is paying NOW. You don’t know what it will be paying 6 months from now, or 1 year from now, or 5 years from now.

You know that the current iBond will be paying 0.5% above inflation every six months for the next 30 years. It will pay 2.83% for the next six months, then 1.90% for the following six months. This ~2.36% average over 12 months does beat a lot of MM funds today.

I have never redeemed before 5 years so I’ve never paid the 3 month penalty.

It’s just a diversification play. I own some IBonds as well as MM funds, short-term CDs, and intermediate CDs and sometimes treasuries. My initial IBond purchase from 2003 is paying 1.1% plus inflation so currently paying 3.32%. I’m definitely holding onto that one until 2033.

There have been periods where IBonds paid more than money markets and short-term CDs.

I am just buying more to replace older IBonds that are paying a lower fixed rate (0.2%), currently 2.52%. When the rate on those older ones drop I may redeem them and redeploy into short-term CDs.

If it’s not a clear win for you I would recommend not to buy IBonds.

[Love This Community]

Quote:

Originally Posted by Big_Hitter we just did a 3% one-year CD with UBS

Hi Bighitter. I tried finding cd rates on ubs website but no luck. I am interested in opening a cd at this rate. Thanks for any information you can provide as to where I can find this rate. Thank you!

[Love This Community]

I just called their 1-800 number and looks like I need to go through my financial advisor ( I don’t have one) to get this promotional rate.

[MJ]

Quote:

Originally Posted by Love This Community Hi Bighitter. I tried finding cd rates on ubs website but no luck. I am interested in opening a cd at this rate. Thanks for any information you can provide as to where I can find this rate. Thank you!

There you go.
https://www.ubs.com/magazines/wma/in...rk-harder.html

[Big_Hitter]

Quote:

Originally Posted by Love This Community I just called their 1-800 number and looks like I need to go through my financial advisor ( I don’t have one) to get this promotional rate.

correct

[Big_Hitter]

Quote:

Originally Posted by MJ There you go. https://www.ubs.com/magazines/wma/in...rk-harder.html

yep

[dvalley]

Quote:

Originally Posted by audreyh1 The thing is, you know what a money market fund is paying NOW. You don’t know what it will be paying 6 months from now, or 1 year from now, or 5 years from now. You know that the current iBond will be paying 0.5% above inflation every six months for the next 30 years. It will pay 2.83% for the next six months, then 1.90% for the following six months. This ~2.36% average over 12 months does beat a lot of MM funds today. I have never redeemed before 5 years so I’ve never paid the 3 month penalty. It’s just a diversification play. I own some IBonds as well as MM funds, short-term CDs, and intermediate CDs and sometimes treasuries. My initial IBond purchase from 2003 is paying 1.1% plus inflation so currently paying 3.32%. I’m definitely holding onto that one until 2033. There have been periods where IBonds paid more than money markets and short-term CDs. I am just buying more to replace older IBonds that are paying a lower fixed rate (0.2%), currently 2.52%. When the rate on those older ones drop I may redeem them and redeploy into short-term CDs. If it’s not a clear win for you I would recommend not to buy IBonds.

Quote:

Originally Posted by copyright1997reloaded 1) No state taxes on savings bond interest. 2) iBond interest is tax-deferred for up to 30 years 2) one year does not a lifetime make. The iBond will return 0.50% real over the life of the investment. (Well, somewhat of a lie in that federal taxes still need to be paid.) A long long time ago there was a period where TIPS and iBonds had a near 4% REAL (plus inflation) return. I was smart enough to buy some of these, but not smart enough to buy a sh*t load of them.

Thanks. I think it makes sense especially for the education purpose I have in mind which will allow the appreciation to be 100% tax free...hopefully.

[Big_Hitter]

Quote:

Originally Posted by audreyh1 The thing is, you know what a money market fund is paying NOW. You don’t know what it will be paying 6 months from now, or 1 year from now, or 5 years from now.

you can make a very educated guess using implied forward rates

[pb4uski]

Quote:

Originally Posted by Big_Hitter you can make a very educated guess using implied forward rates

If the Fed is allegedly trying to manage the money supply to a 2% inflation target... wouldn't the expected rate be ~2.5%? (2% inflation + 0.5% real return)

[Big_Hitter]

Quote:

Originally Posted by pb4uski If the Fed is allegedly trying to manage the money supply to a 2% inflation target... wouldn't the expected rate be ~2.5%? (2% inflation + 0.55 real return)

I'm not sure. I haven't thought about it too much. I just got the 3% CD cause it sounded like a good deal.

This is how I remember doing the analysis.

"The usefulness of bootstrapping is that using only a few carefully selected zero-coupon products, it becomes possible to derive par swap rates (forward and spot) for all maturities given the solved curve."

for example, using bootstrapping, one can derive the implied future rate of return on 1 year tbills 5 years from now, etc.

https://en.wikipedia.org/wiki/Bootstrapping_(finance)

[njhowie]

Quote:

Originally Posted by pb4uski If the Fed is allegedly trying to manage the money supply to a 2% inflation target... wouldn't the expected rate be ~2.5%? (2% inflation + 0.5% real return)

Exactly!

And if you believe that the Fed can do that, the implication is that any long term CD yielding above 2.5% (plus state taxes) will beat out the equivalent maturity iBond/TIP.

Now, inflation has been running below the 2% target for some time, and now it is right about 2%. Words from the Fed over the past year have indicated they are willing to let the economy "run hot" with inflation slightly above 2%.

I personally do not believe that the Fed is capable of managing inflation so tightly. I also don't believe that we're likely to see runaway inflation as we did in the 1970s. However, in a low interest rate environment, the iBond/TIP provides a reasonable insurance policy just in case it happens.

[Big_Hitter]

year x implied inflation can be gleaned by taking the difference in the x-year treasury yield minus the x-year tips yield

[audreyh1]

Apparently inflation is falling behind that 2% target again. That usually makes the Fed nervous.

Dec 2018 CPI 1.9% Year-over-year
Jan 2019 CPI 1.6% YOY
Feb 2019 CPI 1.5% YOY
March 2019 CPI 1.9% YOY

which is precisely why the inflation component for IBonds is dropping so dramatically.

[njhowie]

Quote:

Originally Posted by Big_Hitter year x implied inflation can be gleaned by taking the difference in the x-year treasury yield minus the x-year tips yield

That and 5 bucks will get you a month of Burger King coffee.

[Big_Hitter]

Quote:

Originally Posted by njhowie That and 5 bucks will get you a month of Burger King coffee.

actually, stuff like that is used quite often in setting assumptions for financial modeling (which is the topic of this thread btw) - and you can make way more than a cup of coffee if you are well versed in it

[audreyh1]

Quote:

Originally Posted by njhowie I personally do not believe that the Fed is capable of managing inflation so tightly. I also don't believe that we're likely to see runaway inflation as we did in the 1970s. However, in a low interest rate environment, the iBond/TIP provides a reasonable insurance policy just in case it happens.

That is a good point, and why I initially bought some iBonds in 2003 when interest rates dropped so much on money markets and savings accounts. And again in 2013 and 2014 for the same reason. It's those 2013 and 2014 purchases that I have been upgrading to the higher fixed rate of 0.5%.

For me it's just one of several "cash equivalent" type assets that I own.