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when do you think cd rates will increase?
Old 07-24-2014, 07:09 AM   #1
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when do you think cd rates will increase?

I have a cd coming due and was wondering if anyone had opinions on how long it would be before the short term interest would start to climb. I know it would be just speculation, but some of you must have an opinion. I have this money coming due and don't know where to put it. do you think penfed will have a special again this year? thanks

frank
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Old 07-24-2014, 07:35 AM   #2
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I have a cd coming due and was wondering if anyone had opinions on how long it would be before the short term interest would start to climb. I know it would be just speculation, but some of you must have an opinion. I have this money coming due and don't know where to put it. do you think penfed will have a special again this year? thanks

frank
If my crystal ball was working (currently, it's not connecting to the future Wall Street Journal), I could answer those questions with some certainty. But my guess is rates will stay low until there is clear evidence that the economy is recovering. That may be another couple of years.

We are all in this dilemma together and can't make much from any interest bearing vehicles. PenFed graced us last year with 3% @ 5 years. Will they do this again? Good question.

Sorry Frank, best I can do. Put the cash in Ally @ 0.84% for the time being or some other institution that pays about the same.
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Old 07-24-2014, 08:05 AM   #3
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Unless you are talking about 25-50 basis points, I don't think anytime soon, unless we start to see inflation take-off. Remember, the short term interest rate is what the Fed is paying to carry its $4 trillion portfolio. If they raise short-term rates, they reduce the profit from the carry (the interest earned less the interest paid), which currently is reducing the deficit. My guess is they are hoping to carry the securities in their portfolio until they mature at a positive carry.
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Old 07-24-2014, 08:08 AM   #4
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I was lucky enough to get in on the Pen Fed 3%/5-year CDin March and just before they took down the offer. Then we had a big IRA mature. What to do. Discussed it with my wife and she took a bold stance. She wanted to refuse the low interest rate offers and pushed me to put all of it in Vanguard VWIAX. Some people on this forum strongly suggest this fund. Hope they are right.
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Old 07-24-2014, 08:33 AM   #5
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It will be the middle of next year, and even then it will be only another .5%, if that.

There are too many factors that need low rates. The Federal Government being the main one that needs low interest rates.

Housing will tank with higher rates.
Auto sales will have difficulty
Businesses will expand less

The USA is virtually dead in terms of decent job creation. Inflation is almost nill. Despite running the printing presses overtime, no one is spending because thay do not have the money to spend. Higher rates will make it worse.
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Old 07-24-2014, 09:10 AM   #6
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I tend to agree with the general sentiment that there are too many pressures keeping rates low. Especially gov't monetary policy now and for the near future. Also economic issues for housing, jobs, and business. with the basically stagnant economy, any raising of interest rates will cause detrimental effects across the board.

So that leaves you with either settling for <1% returns, or change to a higher risk investment. You might consider a conservative mutual fund type, such as Wellsley or similar.
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Old 07-24-2014, 10:23 AM   #7
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I would park it in an online savings for now and hope that PenFed does another special in December.
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Old 07-24-2014, 10:29 AM   #8
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I would park it in an online savings for now and hope that PenFed does another special in December.

I'm in a similar dilemma and doing the above. If penfed offers another 3+% rate I will take it, if not, I will have to look at other avenues, but that is as long as I am willing to stay on the sidelines.
You might look at paying off the mortgage, if you have one, and depending on the current rate
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Old 07-24-2014, 11:04 AM   #9
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I was lucky enough to get in on the Pen Fed 3%/5-year CDin March and just before they took down the offer. Then we had a big IRA mature. What to do. Discussed it with my wife and she took a bold stance. She wanted to refuse the low interest rate offers and pushed me to put all of it in Vanguard VWIAX. Some people on this forum strongly suggest this fund. Hope they are right.
I bought $500k of 3% penfed cds (two dif accts for insur coverage) It is a big part of my fixed income (taxable)... should I consider rolling over some of my 401k $$$ into them if they offer it again? I need to roll it over since I sold business. rest will be Vanguard bond funds.

Tough to decide with no great options.

Deb

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Old 07-24-2014, 11:08 AM   #10
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Probably not until 2016.
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Old 07-24-2014, 11:18 AM   #11
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With PENFED making some very low rate loans (0% new car loans come to mind) I personally am not anticipating any EOY deals from them as they would have to more than double their current rates to get near 3%. Best CD rates have been at Navy FCU for some time and to get them takes 7 year CD's and large purchases (for those that have accounts there).

However IMO a unused HELOC can be a good tool to use to take advantage of "deals"; like the 5% APY 10 Year CD's PenFed offered in 2011.

As one poster pointed out rates will be low IMO for a very long time and if and when they do rise it will be a very slow process.
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Old 07-24-2014, 01:34 PM   #12
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Originally Posted by frank View Post
I have a cd coming due and was wondering if anyone had opinions on how long it would be before the short term interest would start to climb. I know it would be just speculation, but some of you must have an opinion. I have this money coming due and don't know where to put it. do you think penfed will have a special again this year? thanks

frank
When do you anticipate needing the money?

Anything less than 3 years, I'd just keep it in an online savings account.
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Old 07-24-2014, 01:55 PM   #13
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The incredibly low rates have force me into the market over the past couple of years to a higher level than I would normally have taken. This of course has earned me far more than 3%.

At this point an exit out of the market into a lower yield bond might still put me ahead of the game vs if I had purchased 3% bonds earlier.
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Old 07-24-2014, 02:54 PM   #14
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At current rates there is no good place to keep cache. Most people will actually loose money (after you deduct inflation and taxes) given current CD rates.

Even at "rare" 3% 5 Year CD you may end up loosing money because who knows where the inflation will go.

Whoever knows where the rates will go can make killing
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Old 07-24-2014, 03:14 PM   #15
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The USA is virtually dead in terms of decent job creation. Inflation is almost nill.
Historical Inflation Rates: 1914-2014 | US Inflation Calculator

2011 3.2% Inflation
2012 2.1%
2013 1.5%
2014 1.9% looking so far

This is huge inflation given low CD rates.
If you get CD below 2.5 you are literarily loosing money. Loosing it slowly but over a years it adds up to big loss.

Cache is not safe
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Old 07-24-2014, 06:24 PM   #16
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My strategy is to put cash in Synchrony Bank's "Optimizer" savings account at 0.95 percent and wait for Pentagon's December sale. Synchrony is offering 15 month CD's at 1.2 percent that would put you close in time to the 2015 Pentagon sale, if there is one. Synchrony was formerly GE Capital Retail Bank and Met Life Bank before that.

Everything else "stinks on ice," to quote Mel Brooks.
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Old 07-24-2014, 08:05 PM   #17
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........ Best CD rates have been at Navy FCU for some time and to get them takes 7 year CD's and large purchases (for those that have accounts there).
............
Actually, Navy Federal usually offers an "Add-On" benefit from Jan 1 til Apr 15th each year. If you already have a CD with them you can add funds and get the same rate for the remainder of the term. Sometimes it is advertised and sometimes it is not. No guarantees it will be available next year, but I have used this twice in the past.
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Old 07-24-2014, 08:22 PM   #18
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Historical Inflation Rates: 1914-2014 | US Inflation Calculator

2011 3.2% Inflation
2012 2.1%
2013 1.5%
2014 1.9% looking so far

This is huge inflation given low CD rates.
If you get CD below 2.5 you are literarily loosing money. Loosing it slowly but over a years it adds up to big loss.

Cache is not safe
One year of a 30% up market in a 60/40 portfolio makes up for a lot of 2% interest rates on the bond portion. Just need to rebalance.
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Old 07-25-2014, 04:29 AM   #19
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it took 35 years to get this low, it may take a decade just to get back to the historical averages of 5-6%
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Old 07-25-2014, 06:45 AM   #20
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I was lucky enough to get in on the Pen Fed 3%/5-year CDin March and just before they took down the offer. Then we had a big IRA mature. What to do. Discussed it with my wife and she took a bold stance. She wanted to refuse the low interest rate offers and pushed me to put all of it in Vanguard VWIAX. Some people on this forum strongly suggest this fund. Hope they are right.
You may want to consider these views before pouring it all into Wellesley.

The fund is vulnerable to rising interest rates because of its long-term bond holdings. On the equity side, the managers pursue a fairly strict value strategy, which can cause the fund to lag behind peers during big rallies.

In the July 2010 edition of The Independent Adviser for Vanguard Investors, Dan Wiener says, "Wellesley Income is a terrific fund for those more interested in income than growth. That being said, I'd almost always take Wellington's greater equity stake over this fund's greater income allocation. With interest rates more surely poised to rise, rather than fall, I'd double that motion."


I'm in a similar situation, with a 4yr CD ladder at PenFed, and a rung coming due in Jan 2015. If PenFed repeats last year's offer of 3% CD rates, I'll buy another rung. If not, I will probably put the $ in FTABX. It's not guaranteed return but, it's low volatility is risk I am comfortable with in this part of our portfolio, especially with its tax treatment. I know this is chasing yield but, hey, that's kind of the point.
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