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CD rates better than 3.1% 5 yr?
Old 05-17-2018, 12:51 PM   #1
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CD rates better than 3.1% 5 yr?

I have some funds I want to place in a CD and am about to open a 5 year CD at Northwest Federal Credit Union for 3.1% APY. I think with 12 mos early withdrawal penalty.
https://www.nwfcu.org/banking/checki...s/certificates

But figured I would check to see if anyone else knew of any deals much better than that?
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Old 05-17-2018, 12:54 PM   #2
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Originally Posted by Earl E Retyre View Post
I have some funds I want to place in a CD and am about to open a 5 year CD at Northwest Federal Credit Union for 3.1% APY. I think with 12 mos early withdrawal penalty.
https://www.nwfcu.org/banking/checki...s/certificates

But figured I would check to see if anyone else knew of any deals much better than that?
I don't see any, Navy Federal is at 3% for 5 year and Pentagon FCU is at 2.74%.
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Old 05-17-2018, 01:49 PM   #3
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Originally Posted by Earl E Retyre View Post
I have some funds I want to place in a CD and am about to open a 5 year CD at Northwest Federal Credit Union for 3.1% APY. I think with 12 mos early withdrawal penalty.
https://www.nwfcu.org/banking/checki...s/certificates

But figured I would check to see if anyone else knew of any deals much better than that?
Fidelity offers a 5 year CD from JP Morgan Chase for 3.25 percent. My understanding is the interest is not compounded on the brokered CD's. I believe that's still better than 3.1 percent APY, which is a compounded rate.
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Old 05-17-2018, 02:18 PM   #4
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Originally Posted by Earl E Retyre View Post
I have some funds I want to place in a CD and am about to open a 5 year CD at Northwest Federal Credit Union for 3.1% APY. I think with 12 mos early withdrawal penalty.
https://www.nwfcu.org/banking/checki...s/certificates

But figured I would check to see if anyone else knew of any deals much better than that?
Schwab has 5 year brokered CD's @ 3.25%. One is Sallie Mae Bank, cusip 795450Q57; the other is Synchrony Bank, cusip 87165GYC0. Both pay semi-annually.

Fidelity has about a half dozen issues @ 3.20%. Issuers include Sallie Mae Bank (semi-annual) , Wells Fargo Bank (monthly), Goldman Sachs (semi-annual), Citibank (semi-annual), Morgan Stanley (semi-annual).

Ameritrade's system is giving me an issue at the moment, but they usually have a bunch of brokered CD's also.

3.25 - 3.10% = 0.15%. On 100K, it is $150/year, so $750 difference (minus taxes) over the life of the CD. Probably worth the effort. Of course, if it is $1K we are talking about, then $1.50/year, not worth worrying about.
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Old 05-17-2018, 02:57 PM   #5
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Following up on the previous thread, when I simplified my investments a few years ago I also tried to limit the number of institutions at which I held CDs. (I have been using only direct CDs.) At one time I had CDs all over the country because I always went for the best rate available. Now I only use Navy Federal, PenFed and one local CU. I might miss out on one or two tenths of a % here and there just as my Boglehead 3 mutual fund portfolio might not earn quite as much as if I sliced and diced. But, to me at this stage of my life the simplicity is worth it. And it should be easier for my wife to deal with if i go first. Nothing wrong with chasing yield but I just don't feel the need to any more.
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Old 05-17-2018, 03:56 PM   #6
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Originally Posted by copyright1997reloaded View Post
Schwab has 5 year brokered CD's @ 3.25%. One is Sallie Mae Bank, cusip 795450Q57; the other is Synchrony Bank, cusip 87165GYC0. Both pay semi-annually.

Fidelity has about a half dozen issues @ 3.20%. Issuers include Sallie Mae Bank (semi-annual) , Wells Fargo Bank (monthly), Goldman Sachs (semi-annual), Citibank (semi-annual), Morgan Stanley (semi-annual).

Ameritrade's system is giving me an issue at the moment, but they usually have a bunch of brokered CD's also.

3.25 - 3.10% = 0.15%. On 100K, it is $150/year, so $750 difference (minus taxes) over the life of the CD. Probably worth the effort. Of course, if it is $1K we are talking about, then $1.50/year, not worth worrying about.
Thanks for the responses. Yes, it is $120k I am talking about. So, 3.25% would be better than 3.1%. I have never purchased a brokered CD before. I have accounts already with both Fidelity and Vanguard. So, if I purchased one, I would go with one of them.

If I understand brokered CDs, I am guessing that the pro for a non-brokered is that I can always cash it in (and take the penalty). Whereas with a brokered, I can only cash it in, if someone is willing to buy it. Although perhaps that is really the same thing. I am planning on holding to maturity anyway so maybe not a big deal.

A pro to brokered is less accounts to manage - since they fall under Vanguard or Fidelity. And, I assume when they mature the funds simply transfer back to my settlement account.

I have a question about new vs secondary markets. New CDs seem clear and I believe it is like buying a new CD. So, maybe I should stick with new issue.

On secondary markets, some are "callable" - which I assume means that they can take it away from me if rates drop. So, I probably do not want callable. Also there are columns for yield to worst and yield to maturity. Most are the same but not all. Difference? Also column for price bid. What does it mean if price bid is not 100? Some are less and some are more.

Thanks!
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CD rates better than 3.1% 5 yr?
Old 05-17-2018, 04:14 PM   #7
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CD rates better than 3.1% 5 yr?

If it's not callable the yields should be the same. If it is callable yield to worst is the least you'll get. Rates seem to be on the rise right now. I'd use a ladder rather than commuting the full amount for 5 yrs.
Prices are adjusted up or down from 100 to account for difference between coupon and current rates. If the coupon is above prevailing rates the price will be >100 to adjust the dividend.
Better yet check out the Learning Center on Fido's website. They're having a webinar on Bonds tomorrow at noon. Principles on bond are CD pricing are similar.
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Old 05-17-2018, 05:28 PM   #8
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Fidelity offers a 5 year CD from JP Morgan Chase for 3.25 percent. My understanding is the interest is not compounded on the brokered CD's. I believe that's still better than 3.1 percent APY, which is a compounded rate.
A minor point. That 5 yr CD is not call protected. The highest protected FIDO 5 yr rate is 3.20%.
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Old 05-17-2018, 08:02 PM   #9
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A minor point. That 5 yr CD is not call protected. The highest protected FIDO 5 yr rate is 3.20%.
Thanks for pointing that out! I haven't bought anything longer than two year, so I completely missed that. Looks like starting around three years, you can get 10 basis points or so if you give up the call protection. Not interested in that exchange, as I don't think I am sufficiently compensated for the call risk.
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Old 05-20-2018, 04:26 PM   #10
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Thanks for pointing that out! I haven't bought anything longer than two year, so I completely missed that. Looks like starting around three years, you can get 10 basis points or so if you give up the call protection. Not interested in that exchange, as I don't think I am sufficiently compensated for the call risk.

A couple points on this:


1. Whatever the five year rate is today, a few weeks from now it will be higher. So, there is no rush to jump at 3.2%, 3.25%, or whatever rate you can find today.


2. You are looking at new issue CDs. As I've mentioned on other CD threads, take some time and periodically browse through your brokers secondary market inventory. You will regularly find CDs available for the same maturity that will provide you with 0.1% to 0.25% more than what is currently offered for new issue - even after you factor in the brokers $1/CD commission.


3. As far as callable CDs, I wouldn't think much of it. First, they won't be called unless interest rates drop below what they are paying. Currently, we all know rates will continue higher in the near/medium-term. Second, if they are called, not such a big deal - you earned a higher yield for the time period which you owned it...which will be shorter than the original 5 year period you agreed to. If you take the higher yielding CD today and they call it in 2 or 3 years - who cares? You received 3.25% 5-year rate for what really was a 2 or 3 year CD.
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Old 05-20-2018, 05:05 PM   #11
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A couple points on this:

3. As far as callable CDs, I wouldn't think much of it. First, they won't be called unless interest rates drop below what they are paying. Currently, we all know rates will continue higher in the near/medium-term. Second, if they are called, not such a big deal - you earned a higher yield for the time period which you owned it...which will be shorter than the original 5 year period you agreed to. If you take the higher yielding CD today and they call it in 2 or 3 years - who cares? You received 3.25% 5-year rate for what really was a 2 or 3 year CD.
Haven't done the math, but conceptually if the CD is called early due to lower rates, wouldn't your interest rates be lower for your next CD vs. taking an original 5 yr non callable CD 2 or 3 years earlier which was only a few basis points lower?
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Old 05-21-2018, 07:40 AM   #12
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PSA:

Connexus credit union just announced a 5-year 3.25% CD: https://www.connexuscu.org/accounts/share-certificates/

Analysis at deposit accounts blog: https://www.depositaccounts.com/bank...-union/offers/

It is easy to get membership there, a $5 donation (see description on the blog) will do it. (I am a member and have purchased their CD's.)
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Old 05-21-2018, 01:45 PM   #13
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A big hassle with regular bank CD is giving them instructions at time of maturity. They will auto roll over to a new cd if you don't. It's a pain to manage. I used to have cd's in a number of banks.. but now, it's just brokered cd's in vanguard.
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Old 05-21-2018, 02:16 PM   #14
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A big hassle with regular bank CD is giving them instructions at time of maturity. They will auto roll over to a new cd if you don't. It's a pain to manage. I used to have cd's in a number of banks.. but now, it's just brokered cd's in vanguard.
Set a reminder in your Calendar......
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Old 05-21-2018, 02:56 PM   #15
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A big hassle with regular bank CD is giving them instructions at time of maturity. They will auto roll over to a new cd if you don't. It's a pain to manage. I used to have cd's in a number of banks.. but now, it's just brokered cd's in vanguard.
What I do. Open new CD. Usually, online, click "box", at maturity, funds are to be put into "savings account". Difficult to mark calendar, 5 years out.
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Old 05-21-2018, 07:08 PM   #16
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AFIK most CDs have a grace period to change the maturity instructions. I think all my credit union CDs let you change any time and send a notice 30 days before maturity. I usually choose deposit to savings and then choose the best combination of term and rate to fit my ladder.
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Old Yesterday, 05:50 AM   #17
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I have never purchased a CD from a Vanguard or Fido. Do they pay interest at maturity on request or always monthly or

Can one select income reinvested for compounding. All my CU CDs have the interest compounded unless I select a Monthly deposit.
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Old Yesterday, 08:43 AM   #18
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I have never purchased a CD from a Vanguard or Fido. Do they pay interest at maturity on request or always monthly or
Can be anything - monthly, quarterly, semi-annually, or if 1 year or less even just at maturity. The purchaser does not decide, it is part of the CD terms, just like the interest rate and maturity.

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Can one select income reinvested for compounding. All my CU CDs have the interest compounded unless I select a Monthly deposit.
No - the interest gets deposited into your cash account at the brokerage.
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Old Yesterday, 09:37 AM   #19
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Just called Vanguard, great service and rep explained everything in great detail. Their Sweep account pays 1.66% which is nice too.
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