Originally Posted by almost there
So you don't think a laddered approach is the way to go?
Say $40k each in a 1/2/5/7/10
There are pro's and cons to laddered CD's. In general a ladder even up to a 10 year rate is a very conservative way to approach fixed income investing, especially after the initial 10 year period setting up the ladder and having all true 10 year instruments at the time of issue. It has been 23 years since we have had a 4% inflation print number for an entire year, we have surpassed 3.4% inflation for a year once in that time period. And there is little risk difference other than liquidity between a brokered CD and a 10 year US treasury bond and the brokered CD you quoted is paying 1% more than a 10 year bond.
The Federal Reserve's concern is deflation not inflation, they are warning they do not think they will see even 2% inflation until 2018 at the earliest. Of course at that point the relevant rate will be the 5-6 year CD rate and not the 10 year rate and it is very possible that rates will not be higher at that point.
In all the studying I have done on bond ladders a 10 year US Treasury bond ladder return has consisitently exceeded the inflation rate over most periods and the implied return of this CD 3.4% is 1.8% over the current year over year inflation of 1.6% is a little lower than what historical expectation for 10 year treasury bonds should offer over inflation which would be about 2 percent and a brokered CD should offer a premium above that rate. But in a world where the national governments are controlling interest rates, predicting what these will do in the future is a fool's game and there is no forcing at the present time the market to offer historically appropriate interest rates.