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Interest Rates on the Move! (Finally)
01-17-2018, 11:18 PM
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#1
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 37,931
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Interest Rates on the Move! (Finally)
After years and years of folks expecting interest rates to climb, interest rates have really moved up this year, particularly this week. The 2yr treasury zoomed past 2% for the first time since 2008, the 10 yr past 2.4% and the 10 yr is awfully close to the 2.6% level that some pundits claim will hurt the equity markets.
Even though the yield curve continues to flatten, all rates have moved up except for the 30 yr bond which is holding steady.
Inflation still seems to be holding at sub-2%, but other things have got the bond market a bit rattled: the continuing Fed balance sheet unwind, China indicating perhaps it would purchase less treasuries, Bloomberg indicating that repatriation of overseas assets means selling US backed bonds held overseas.
I am invested in fixed income for the long term. I figure if it gets hit hard this year I’ll have an opportunity to rebalance. Tough years are usually followed by bond market rallies. It’s just interesting to watch things unfold.
It will be really interesting to see what high yield savings accounts yield this year and what CD offers will be near the end of this year.
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Retired since summer 1999.
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01-18-2018, 02:17 AM
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#2
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Thinks s/he gets paid by the post
Join Date: Dec 2009
Location: Alberta/Ontario/ Arizona
Posts: 3,393
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Yes, looks like they are finally moving back to more normal levels. Some companies will benefit (especially banks) while most others will face higher debt costs. Lower taxes will offset. I don’t have any FI (view my pension as a FI proxy) and am overweight banks, so looks like I’m well positioned. But in the overall scheme of things it has to be a good thing when the economy is doing so well and jobs are being created.
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01-18-2018, 04:12 AM
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#3
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Full time employment: Posting here.
Join Date: Jun 2016
Posts: 889
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The yield curve is only about 50 BP away from inverting. If it does invert ...... bad thigs could be coming economically. I would pay more attention to the 2-10 year spread than to short term interest rates as a predictor
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01-18-2018, 04:12 AM
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#4
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Thinks s/he gets paid by the post
Join Date: Dec 2015
Location: Michigan
Posts: 4,939
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We do not hold a lot of cash, but it is nicer to make something on what we have.
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"The mountains are calling, and I must go." John Muir
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01-18-2018, 04:21 AM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 37,931
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Quote:
Originally Posted by BeachOrCity
The yield curve is only about 50 BP away from inverting. If it does invert ...... bad thigs could be coming economically. I would pay more attention to the 2-10 year spread than to short term interest rates as a predictor
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I’m skeptical that it will invert based on recent behavior with the 10yr rate rising. Maybe ignoring the 30 year.
But if it does, usually that portends a recession in two years.
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Retired since summer 1999.
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01-18-2018, 04:33 AM
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#6
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Full time employment: Posting here.
Join Date: May 2015
Location: Atlanta suburbs
Posts: 633
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The effect on future estimated pension payments, already increasing, is especially welcome.
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01-18-2018, 06:02 AM
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#7
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Moderator
Join Date: Feb 2010
Location: Flyover country
Posts: 25,155
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Quote:
Originally Posted by audreyh1
It will be really interesting to see what high yield savings accounts yield this year and what CD offers will be near the end of this year.
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My online savings account at Discover (opened through AAII) just got bumped up to 1.45%. Nice start to the year.
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I thought growing old would take longer.
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01-18-2018, 06:11 AM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,204
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Interesting.... their website and my account say 1.40%, not 1.45%... I wonder if AAII has a special deal with a 5bp bump?
https://www.discover.com/online-bank...vings-account/
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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01-18-2018, 06:20 AM
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#9
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gone traveling
Join Date: Mar 2015
Location: Greenville
Posts: 653
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I think it is interesting that we are talking about 1-2% interest as a.) a boon for interest rates, and b.) OMG, interest rates are climbing, bad things are going to happen. When interest rates start tripling or quadrupling I'll worry about bad omens. For now, it is still well under inflation, and by the way, inflation is really low...
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01-18-2018, 06:24 AM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 37,931
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Quote:
Originally Posted by pb4uski
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Apparently they do as one other poster reported.
In the meantime, Synchrony Bank is offering 1.45% standard and I notice some places offering 1.5% and 1.6% according to Bankrate.com.
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Retired since summer 1999.
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01-18-2018, 06:34 AM
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#11
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Moderator
Join Date: Feb 2010
Location: Flyover country
Posts: 25,155
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Quote:
Originally Posted by pb4uski
Interesting.... their website and my account say 1.40%, not 1.45%... I wonder if AAII has a special deal with a 5bp bump?
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Yes, as I've said before, I opened this account as an AAII member years ago, and it has always been .05% higher than the published rate.
https://aaii.discoverbank.com/aaii/index.html
__________________
I thought growing old would take longer.
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01-18-2018, 07:13 AM
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#12
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Thinks s/he gets paid by the post
Join Date: Jan 2013
Posts: 3,405
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Synchrony is still at 1.5 percent for savings and 2.0 percent for 1 year CD's.
I bought some more 3 month to one year CD's plus some 2.3 percent 2 year Wells Fargo CD's at Fido for cash in the IRA in the last few days. Trying to keep the ladder at one year because interest rates are rising, but was tempted to put a little in the 2.3 percent two year CD's. The government money market settlement fund is at 0.95 percent, I think.
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01-18-2018, 07:18 AM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 37,931
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Quote:
Originally Posted by Another Reader
Synchrony is still at 1.5 percent for savings and 2.0 percent for 1 year CD's.
I bought some more 3 month to one year CD's plus some 2.3 percent 2 year Wells Fargo CD's at Fido for cash in the IRA in the last few days. Trying to keep the ladder at one year because interest rates are rising, but was tempted to put a little in the 2.3 percent two year CD's. The government money market settlement fund is at 0.95 percent, I think.
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Synchrony is still at 1.45% for savings AFAIK.
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Retired since summer 1999.
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01-18-2018, 07:27 AM
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#14
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Thinks s/he gets paid by the post
Join Date: Jan 2013
Posts: 3,405
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Oops. Goldman Sachs/Marcus is at 1.5 percent. I have both, got confused.
ETA: Getting kind of annoyed at Ally. They are sticking at 1.25 percent. A quarter point does not generally motivate me to transfer money, but 1.5/1.25 is a 20 percent difference, so I'm griping.
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01-18-2018, 07:41 AM
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#15
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gone traveling
Join Date: Mar 2015
Location: Greenville
Posts: 653
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A pension that I have from a former employer (that I can't get at until I am 65) has a guaranteed interest rate each year set at the beginning of the year. Let year was 4.10%. I just looked to see if 2018was updated, and it is, and is set at 4.17%
I would like to know what they are investing in. Even 30 year T-bills are only slightly over 1/2 of this i think. Ok by me, just wondered what they have this invested in for these return "interest" rates.
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01-18-2018, 10:40 AM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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At this point in the cycle I am not eager to lock anything in. I have CDs maturing through this year and they will likely get rolled over to short terms. In brokerage accounts I am throwing in the towel and investing portfolio cash into FLRN (a bit), a floating rate corporate fund, and Treasury floaters. I think I am happiest with the latter, as these are two year maturity treasuries that pay a quarterly rate based on the coupon (near zero) plus a floating rate based on 90 day T bills. If I want or need out earlier than maturity I can always sell and the short maturity and floating rate nature means they will always stay close to par.
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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01-18-2018, 11:35 AM
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#17
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Thinks s/he gets paid by the post
Join Date: Aug 2013
Location: North
Posts: 4,023
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Quote:
Originally Posted by Danmar
Yes, looks like they are finally moving back to more normal levels. Some companies will benefit (especially banks) while most others will face higher debt costs. Lower taxes will offset.
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work for one ESOP also well positioned like Danmar with my ETF hedge
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Time > $$$ ~ 100% equities ~ FIRE @2031
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01-18-2018, 11:43 AM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 37,931
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The interest rate calendar by month - the 10 year interest rate tends to rise through April, with April being the month with the highest rise. Then peter out during the summer which a substantial drop in rates in August.
So given the seasonal pattern I think we'll see a strong rise in rates through April before anything backs off.
If the 10 year gets close to 3% that could spook the equity markets.
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Retired since summer 1999.
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01-18-2018, 12:24 PM
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#19
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 16,972
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Quote:
Originally Posted by braumeister
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Are you a fan of AAII ?
Over the years I've gotten their mailings, have wondered, but others on the web said all the info is already on the internet/common knowledge.
What are your thoughts, is it good ?
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01-18-2018, 12:29 PM
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#20
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Moderator
Join Date: Feb 2010
Location: Flyover country
Posts: 25,155
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Quote:
Originally Posted by Sunset
Are you a fan of AAII ?
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Wouldn't call myself a fan, but not a critic either. A long time ago when I wasn't as knowledgeable about investing, I decided their information was as good as I had seen anywhere else, so I bought a lifetime membership. Nothing bad to say about them, as long as you ignore their occasional attempts to get you to sign up for their special programs. I still occasionally find a nugget of useful advice in their stuff.
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I thought growing old would take longer.
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