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Interest Rates on the Move! (Finally)
Old 01-17-2018, 11:18 PM   #1
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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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Old 01-18-2018, 02:17 AM   #2
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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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Old 01-18-2018, 04:12 AM   #3
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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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Old 01-18-2018, 04:12 AM   #4
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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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Old 01-18-2018, 04:21 AM   #5
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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
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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Old 01-18-2018, 04:33 AM   #6
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The effect on future estimated pension payments, already increasing, is especially welcome.
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Old 01-18-2018, 06:02 AM   #7
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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.
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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Old 01-18-2018, 06:11 AM   #8
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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/
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Old 01-18-2018, 06:20 AM   #9
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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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Old 01-18-2018, 06:24 AM   #10
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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/
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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Old 01-18-2018, 06:34 AM   #11
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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?
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
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Old 01-18-2018, 07:13 AM   #12
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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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Old 01-18-2018, 07:18 AM   #13
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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.
Synchrony is still at 1.45% for savings AFAIK.
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Old 01-18-2018, 07:27 AM   #14
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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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Old 01-18-2018, 07:41 AM   #15
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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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Old 01-18-2018, 10:40 AM   #16
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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.
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Old 01-18-2018, 11:35 AM   #17
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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.
work for one ESOP also well positioned like Danmar with my ETF hedge
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Old 01-18-2018, 11:43 AM   #18
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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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Old 01-18-2018, 12:24 PM   #19
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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
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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Old 01-18-2018, 12:29 PM   #20
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Are you a fan of AAII ?
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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