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Old 09-18-2014, 06:53 AM   #21
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Hmm. I need to ponder that further. Obviously, I can see where that is technically correct. But perhaps not the complete economic reality. If you are locked into a low-interest rate CD while rates are rising sharply... at some point, it will become beneficial to pay the penalty and lock in a higher rate. Did you not take that action because you were "losing money" on the interest rate? I'm certainly no expert in this area, but I think it's clear that CDs do have interest rate risk. I have no idea how to measure it, but duration=0 seems like an understatement .....
Like I say, I struggled with what a good duration for my CD would be. I posed the question here and got a variety of responses. I would lose 6 months interest if I withdraw early so I can see the numerator being 1.5% (50% of 3% rate) but the question is how much of an increase would drive me to withdraw early? If 1% would incentive me to roll it over then the duration can be thought of as 1.5, if it s 2% then the duration could be thought of as 0.75. At the end of the day I figured that 0 was close enough since if I changed the 0 to .75 the weighted average only increase by .2
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Old 09-19-2014, 12:24 PM   #22
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Personally I have found a couple of decent "fixed returns" somewhat recently:

1. PFCU: 10 year 5% APY CD Purchased 1/1/2010.
2. NFCU: 7 year 3.5-4.0% APY CD's Purchased in the 2011-2013 Timeframe.
3. PFCU: 7 Year 3.04% APY CD's (Several) Purchased in Jan/Feb 2014.
4. NFCU: 1 Year 5% APY CD's (Two) Purchased early this month.

These have been "deals" that did not result from holding idle Cash in a MM or other "0% or low interest account but the result of a long term (7 to 10 year) CD Ladder.

However, I personally doubt we will see routine CD's in the 5% APY range any time soon. It has taken about 6 or 7 years to get where we are now - hopefully it will not take 6 or 7 years to recover, but who knows?
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Old 09-19-2014, 03:04 PM   #23
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Personally I have found a couple of decent "fixed returns" somewhat recently:

1. PFCU: 10 year 5% APY CD Purchased 1/1/2010.
2. NFCU: 7 year 3.5-4.0% APY CD's Purchased in the 2011-2013 Timeframe.
3. PFCU: 7 Year 3.04% APY CD's (Several) Purchased in Jan/Feb 2014.
4. NFCU: 1 Year 5% APY CD's (Two) Purchased early this month.

These have been "deals" that did not result from holding idle Cash in a MM or other "0% or low interest account but the result of a long term (7 to 10 year) CD Ladder.

However, I personally doubt we will see routine CD's in the 5% APY range any time soon. It has taken about 6 or 7 years to get where we are now - hopefully it will not take 6 or 7 years to recover, but who knows?

I am a CD kind of guy... Wanna take a gamble and trade your CD rates with mine behind door number #2?


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Old 09-19-2014, 04:54 PM   #24
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Quote:
Originally Posted by OAG View Post
Personally I have found a couple of decent "fixed returns" somewhat recently:

1. PFCU: 10 year 5% APY CD Purchased 1/1/2010.
2. NFCU: 7 year 3.5-4.0% APY CD's Purchased in the 2011-2013 Timeframe.
3. PFCU: 7 Year 3.04% APY CD's (Several) Purchased in Jan/Feb 2014.
4. NFCU: 1 Year 5% APY CD's (Two) Purchased early this month.

These have been "deals" that did not result from holding idle Cash in a MM or other "0% or low interest account but the result of a long term (7 to 10 year) CD Ladder.

However, I personally doubt we will see routine CD's in the 5% APY range any time soon. It has taken about 6 or 7 years to get where we are now - hopefully it will not take 6 or 7 years to recover, but who knows?
Very astute buying, OAG. I have kind of decided that in today's fixed income environment it is probably wiser to be buying CDs that can be surrendered at a nominal penalty rather than bond/bond funds. I keep some allocation to bond funds to avoid outsmarting myself, but otherwise I do like you do and wait for Pen or Navy to get silly with CD rates as the tend to do from time to time. When they do offer up an opportunity, I grab it with whatever I can. I bought some of all the ones you listed. I have a maturity coming up in January and I will probably just sit tight and watch the two military credit unions for an opportunity to put the money back to work at an above market rate.
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