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Old 05-11-2016, 04:23 PM   #21
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A good resource is https://www.depositaccounts.com
Note that higher yields may come with membership restrictions or minimum balance or usage requirements. Credit unions have an equivalent deposit insurance by NCUA.
I always look at bankrate.com for info.

Personally, I use a local small bank (columbusfirstbank.com) that has very competitive CD rates. Currently they offer 2.00% for 60 month CDs that compares well nationally.

AND it's super convenient to drop by there and take care of it. They know me.

AND I like keeping a bit of my money local - when my CPA was doing my taxes he noticed the interest from CFB and noted that he's part of a real estate local partnership that gets loans from them. So I'm loaning it to him. A nice George Bailey kind of thing there.

Many people find similar rates at their local credit union as well.
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Old 05-11-2016, 04:24 PM   #22
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I agree. 10 year A rated Corp bonds are still returning 3.3%. I have been buying so many of those lately to keep filling maturing rings of my 10 year ladder(with an occasional brokered CD), that it feels like I have my own bond fund. I do avoid bank bonds however.


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Old 05-11-2016, 04:27 PM   #23
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Besides Ally, where do you go for best FDIC CD rates?

Same thing for savings. I'm getting 0.85% at Ally. Any other FDIC savings worthwhile (although scraping for basis points seems kind of lame)?
Most of the online banks e.g. Sychrony, Discover, GS Bank (formerly GE Capital), etc. are in the same ballpark as Ally. I currently use GS Bank and their online savings is 1.05%
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Old 05-11-2016, 05:46 PM   #24
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I agree. 10 year A rated Corp bonds are still returning 3.3%. I have been buying so many of those lately to keep filling maturing rings of my 10 year ladder(with an occasional brokered CD), that it feels like I have my own bond fund. I do avoid bank bonds however.


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I do something a bit different. I own no CDs or bonds, but loaded up on preferred stock of regulated utilities. I mostly buy from companies with A rated senior debt then buy the preferreds. Most of these preferreds were issued in mid 6% range when 10 year was 4.5% percent and take advantage of the yield trapped nature of par yield in relation to them being past call. With after tax income of my major issues covering the preferred dividends by 50-70 times, I feel pretty comfortable with their stability and ability to pay. Several of them have paid religiously on same issue for 50 years and more.
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Old 05-11-2016, 06:34 PM   #25
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... the yield trapped nature of par yield in relation to them being past call. ..
What does that mean?

If you are buying at a premium to par, and there is no call protection (does past call mean they are past the date the issuer is required to wait to redeem) don't you risk the issuer calling at par at any time, losing your premium?
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Old 05-11-2016, 07:01 PM   #26
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What does that mean?



If you are buying at a premium to par, and there is no call protection (does past call mean they are past the date the issuer is required to wait to redeem) don't you risk the issuer calling at par at any time, losing your premium?


The prices of the issues stay relatively close to par because of call risk. As recently as earlier this week you could have bought CNLPL about one dividend above with next dividend already declared. No loss of principal risk there with a 6.1% yield. It has been callable since the 1970s so I am not worried. In fact all of mine have been callable for decades except for a couple that are not callable.
The key is to buy tiny series issued preferreds from huge companies. These companies have abandoned the preferred stock capitalization structure decades ago issuing cheaper debt now instead, but left the tiny issues stranded and delisted them. Not worth their time and effort to call. 6 months profits from these big utilities could pay off entire series of the issued preferreds but they don't bother. I have one that yields 7.15% that is only a $450,000 stranded issue. The original utility has been bought out twice and only that amount of a $10 million issue from decades ago is still in circulation.
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Old 05-11-2016, 07:14 PM   #27
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What does that mean?



If you are buying at a premium to par, and there is no call protection (does past call mean they are past the date the issuer is required to wait to redeem) don't you risk the issuer calling at par at any time, losing your premium?


Forgot to explain. The old ones were issued in higher yield environments. If there was no call threat their yield would be around 5% as that is the going rate mostly now. But since these were issued in a mid 6 environment you get the free extra yield as no one is going to pay $5 above par on a past call issue to drive yield down to market rate.
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Old 05-11-2016, 07:28 PM   #28
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Great responses guys and appreciate it.

For disclosure... I'm kind of an auto-contrarian (not in a good way). I see the yield on other investment, see people recommend them for just that reason and am concerned that the yield chasing element must be increasing the risk or creating some kind of other invisible problem.

Since I don't understand this things that well I tend to be risk averse about it . Maybe I should research more as the value difference is large.

Thanks!

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Old 05-11-2016, 07:39 PM   #29
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100% CD's Current Laddered (over 7 years) yield is 2.74% on Non-IRA CD's, 3.04% on T-IRA CD's (In RMD status) and 3.04% on ROTH IRA. High % is at Navy FCU and Pentagon FCU (Small amount at another military FCU. Most recent purchases have been 2.32% 7 Year CD's (with the exception of a couple of shorter term "specials" at 2.97%). All yields cited are APR.
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Old 05-11-2016, 07:44 PM   #30
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Ally's 5-year CD is quite good (2.0%), especially with the early withdrawal penalty of 0.8%. If you add up a 3 yr CD, compared to a 5 yr CD with a penalty, the 5 year CD still wins after 3 yrs. So my "CD ladder" consists of 5 yr CDs at Ally.

The FDIC insurance and locked interest rate is a nice benefit over bond funds. But I hold both CDs and bond funds.
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Old 05-11-2016, 08:28 PM   #31
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The prices of the issues stay relatively close to par because of call risk. As recently as earlier this week you could have bought CNLPL about one dividend above with next dividend already declared. No loss of principal risk there with a 6.1% yield. It has been callable since the 1970s so I am not worried. In fact all of mine have been callable for decades except for a couple that are not callable.
The key is to buy tiny series issued preferreds from huge companies. These companies have abandoned the preferred stock capitalization structure decades ago issuing cheaper debt now instead, but left the tiny issues stranded and delisted them. Not worth their time and effort to call. 6 months profits from these big utilities could pay off entire series of the issued preferreds but they don't bother. I have one that yields 7.15% that is only a $450,000 stranded issue. The original utility has been bought out twice and only that amount of a $10 million issue from decades ago is still in circulation.
Cool. So, you get any premium back in the first (few, worst case) dividend(s)?

Where do you find/ how do you trade these?
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Old 05-11-2016, 09:53 PM   #32
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Take a look at the "Yield to Worst" on those bonds too. If rates rise those bonds will probably not be called meaning your 7-10 year bonds become 15-16 year ones. If the bonds are trading at a discount that will cut the yield quite a bit. Also, you'll double the maturity and their sensitivity to interest rates.

3% tax free sounds very nice, though. I'd also check credit risk on those.
I don't pay over par but I will buy single A rated bonds except Puerto Rico, Rhode island, Chicago and I stay away from Illinois except for Illinois GOs and O'Hare Airport. Most of the bonds I own are A-AA. I have over 80 separate bonds so I am well diversified. I prefer State GOs because no Chapter 9 risk.
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Has anyone else moved from bonds to CDs.
Old 05-11-2016, 10:07 PM   #33
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Has anyone else moved from bonds to CDs.

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Cool. So, you get any premium back in the first (few, worst case) dividend(s)?



Where do you find/ how do you trade these?


If you go to Quantumonline and put in ticker symbol for various utilities such as Exelon, Entergy, Eversource, Ameren, etc. and hit link of various issues, the ticker symbols of various issues they own will come up with the original par yield. Then you would check their last sell price for yield. Always use bid price and they are very illiquid and look to smack you on a high ask price. You have to be patient with a bid. Some days they do not even trade. But last week somebody unloaded a huge block of CNLPL that could be had for $52.80. Call price of $51.84 and 81 cent divi declared for July already made this a no brainer and I loaded up for some more. Investment grade 6.1% issue that pays as sure as the sun rises since issued in 1968.
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Old 05-12-2016, 03:14 AM   #34
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I've moved pretty much everything I can to bank CDs from bonds. For me it's overwhelmingly obvious that they are mispriced securities.

CD's have U.S. government default risk but yield 60% more than 5-year treasury bonds.

In addition to offering above market yields, many CD's also have a low-cost interest rate put option. If interest rates rise, I can break the CD and reinvest at higher rates for a 1% fee. 5 year treasury bonds, meanwhile, lose about 4% for every 100bp increase in rates.

And if rates fall, I'll still earn 60% more over the life of the security than I would have had I owned the treasury bond to maturity.
I pretty much agree with you. But how are you discounting the advantage of intermediate US treasuries over CDs if there is a flight-to-quality issue, as we had in '08? Not sure if the theoretical zero interest lower bound would matter in the event of a non-inflation crisis.
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