Will CDs go up in the next year?

[street]

what would be your guess on interest rates going up on CD's with in the next year?

I'm getting 2.6% not the best but I have a small part (CD) of my portfolio with a local bank.

Renew it or hold on and see? I will stay local at this bank with this CD. Thanks

 

[njhowie]

You're getting 2.6%, but for what term? 2 or 3 years?

If the Fed keeps raising interest rates, then short-term CD rates will continue to move higher. Further out than 3 or 5 years, then how the rates will move is anyones guess.

What your local bank does is also anyones guess. In general, I've found that local retail bank branches give some of the worst rates - basically ripping off the local folks.

If you're going to tie the money up in a CD for some term, why decide to keep it at your local bank when you could be getting much better rates from hundreds of banks through your brokerage account or directly with online banks? You could get better rates today compared to what you're getting at your local bank, regardless of where rates go.

 

[ShokWaveRider]

OP, Can a Duck Swim?

You need to keep your eyes here:

http://www.early-retirement.org/for...e-post-updates-here-93051-14.html#post2114434

 

[jazz4cash]

Yes.

 

[Dash man]

Maybe yes, if the economy stays strong. Maybe no if the economy tanks. Maybe nothing changes if the economy can’t figure out what to do. Or maybe an asteroid will hit us on Friday while I’m at the beach.

 

[Lukeee]

OP, Can a Duck Swim?

You need to keep your eyes here:

http://www.early-retirement.org/for...e-post-updates-here-93051-14.html#post2114434

 

[Helena]

.

A local regional bank [LA/TX] is now offering a "variable CD" that has a floor rate and will also increase if the federal funds rate increases.

For example, I just took out a 5 year variable CD with the floor rate of 3%. If the Fed increases the rate .25 tomorrow, October 1 my interest rate will increase to 3.25%. If the Fed rate decreases, my interest rate will decease too... but never below the floor rate of 3%. Most experts think the Fed will continue to raise rates the next year or so.

Variable CD

.

 

[GravitySucks]

Yes.
But maybe not.

 

[Oz investor]

short term YES , next year ... maybe

 

[street]

^ thanks for your insight.

 

[ShokWaveRider]

The Key question is will 4% be the Norm for 3 Years and above.

 

[njhowie]

The Key question is will 4% be the Norm for 3 Years and above.

...and how long until we get there?

 

[foxfirev5]

...and how long until we get there?

Or will we get there at all? I'm concerned my 5 year CD ladder may not be long enough when compared to intermediate and total bond funds. Rather than being fixated on the 2 year rise in yields I'm considering adding to my 7-10 year CD's even though the incremental yield advantage is miniscule. Lock in some 3.5% safe income for future years while it's still available. Anyway I'm reinvesting a ladder so I can't get into too much trouble at once.

 

[ShokWaveRider]

I have to wait until December 2018 and January 2019 till PenFeds Mature.

 

[Lukeee]

Here is something I found

Source: Interest Rates - Fed Fund Rate, Fed Discount Rate, Prime Rate, CD Rate | Stretch A Dime

 

[njhowie]

Or will we get there at all? I'm concerned my 5 year CD ladder may not be long enough when compared to intermediate and total bond funds. Rather than being fixated on the 2 year rise in yields I'm considering adding to my 7-10 year CD's even though the incremental yield advantage is miniscule. Lock in some 3.5% safe income for future years while it's still available. Anyway I'm reinvesting a ladder so I can't get into too much trouble at once.

Absolutely - I could not agree more.

I don't have "a ladder" per se, but essentially my own maturity curve which I am buying CDs along. As maturities come up, I just purchase new ones somewhere along my curve where I get the best bang for the buck. Periodically, I have to bite my tongue and buy something 5 to 10 years out. Along this line of thought, earlier this week, a new CD from HSBC showed up, 4% for 13 years - it's still out there, available at Merrill and Fidelity. I nibbled on a couple - simply because like you, I have no idea when/where rates will top out, I need to have some longer term stuff, and who knows what will happen with stuff at 10 years and longer? However, based on where we've been, I can live with 4% for 13 years. The only one Fidelity is showing further out is a 15 year 3.7% from JPM. So the 4% for 13 years looks pretty good in that respect.

 

[foxfirev5]

Absolutely - I could not agree more.

I don't have "a ladder" per se, but essentially my own maturity curve which I am buying CDs along. As maturities come up, I just purchase new ones somewhere along my curve where I get the best bang for the buck. Periodically, I have to bite my tongue and buy something 5 to 10 years out. Along this line of thought, earlier this week, a new CD from HSBC showed up, 4% for 13 years - it's still out there, available at Merrill and Fidelity. I nibbled on a couple - simply because like you, I have no idea when/where rates will top out, I need to have some longer term stuff, and who knows what will happen with stuff at 10 years and longer? However, based on where we've been, I can live with 4% for 13 years. The only one Fidelity is showing further out is a 15 year 3.7% from JPM. So the 4% for 13 years looks pretty good in that respect.

Thanks for the tip. I'll see what's available next week after my equity divies hit. I'm not seeing the need to be too greedy right now.

 

[jazz4cash]

Absolutely - I could not agree more.



I don't have "a ladder" per se, but essentially my own maturity curve which I am buying CDs along. As maturities come up, I just purchase new ones somewhere along my curve where I get the best bang for the buck. Periodically, I have to bite my tongue and buy something 5 to 10 years out. Along this line of thought, earlier this week, a new CD from HSBC showed up, 4% for 13 years - it's still out there, available at Merrill and Fidelity. I nibbled on a couple - simply because like you, I have no idea when/where rates will top out, I need to have some longer term stuff, and who knows what will happen with stuff at 10 years and longer? However, based on where we've been, I can live with 4% for 13 years. The only one Fidelity is showing further out is a 15 year 3.7% from JPM. So the 4% for 13 years looks pretty good in that respect.

I’m actually going shorter term cause that’s where I see value (3yrs and less). I watched a Fido fixed income webinar today and there was some dialogue to this effect (eg going shorter in anticipation of rising rates.). I need to go back and watch it again from the archive. I might be tempted to nibble on 4% for 13 but it would be a tiny chunk to barely pay my expenses. Then again I’m still sitting on 5% for 10 PenFed’s and I still recall how tough it was to commit to a 10yr CD.

 

[foxfirev5]

I’m actually going shorter term cause that’s where I see value (3yrs and less). I watched a Fido fixed income webinar today and there was some dialogue to this effect (eg going shorter in anticipation of rising rates.). I need to go back and watch it again from the archive. I might be tempted to nibble on 4% for 13 but it would be a tiny chunk to barely pay my expenses. Then again I’m still sitting on 5% for 10 PenFed’s and I still recall how tough it was to commit to a 10yr CD.

Yeah, it's a tough call. But I firmly believe that the quality credit market is very efficient. Long term rates are where they are for a reason. In any event I fill my income needs with what is available. We'll see how it works out.

 

[njhowie]

I’m actually going shorter term cause that’s where I see value (3yrs and less). I watched a Fido fixed income webinar today and there was some dialogue to this effect (eg going shorter in anticipation of rising rates.). I need to go back and watch it again from the archive. I might be tempted to nibble on 4% for 13 but it would be a tiny chunk to barely pay my expenses. Then again I’m still sitting on 5% for 10 PenFed’s and I still recall how tough it was to commit to a 10yr CD.

Sure - my maturity curve looks like the right half of a bell curve - heavily weighted in short-term maturities. A good 70% of my portfolio matures in 3 years or less, and as I recycle them, probably about that same percentage is put back in to stuff maturing in 3 years or less. However, I will judiciously pick up some stuff further out along the way...just so I don't find myself in a position where rates begin to fall again, all the short-term stuff matures without being able to get more fixed income for better rates and getting squeezed out because I didn't pick up longer term stuff sooner. I want to be in your position - holding those 10-year CDs locked in at a great rate while market rates head lower. We just don't know how high the rates will be going. Exactly the same way everyone whines about not timing the stock market, I proceed with that mindset with my fixed income...I'm not going to try and time it for picking up the longer term stuff at exactly the highest yield...I'll just nibble over time increasing my portfolio yield and income stream as long as rates keep going up. Whenever they stop, I'll have enough in longer-term maturities to weather the next downturn in rates. Will I have jumped in to the 10 and 20 year CDs with 50% of my portfolio at just the right time? Of course not. And that's not my objective.

 

[jazz4cash]

Good discussion. Another thing I recently realized is that my decisions to fill rungs on my lumpy ladder are being influenced heavily by anticipation of SS at FRA. In 4 yrs my need for FI will drop noticeably. I use a bar graph that shows maturity date vs value to get a graphic image of where the holes are. I haphazardly added a bar at FRA and instantly all the gaps beyond that date became insignificant.

 

[dtbach]

Fed just raised rates again the other day and plan on doing it 3 more times next year. So I'd say that there should be an excellent chance of CD's going up next year.


That said, I prefer dividend stocks to CD's. They raise the dividend long term and often do splits. So I normally don't do much with CD's.

 

[Drake3287]

Agree, between this latest rate increase and what's projected, we're looking at 3%+ in the coming months. Certainly much better then what we had not long ago.

 

[Helena]

Fed just raised rates again the other day and plan on doing it 3 more times next year. So I'd s
ay that there should be an excellent chance of CD's going up next year.

The interest rate on my local bank 5 year "variable CD" automatically goes up the next month every time the Fed increases the funds rate. I took the CD out about a week ago at the floor rate of 3%. Now that the Fed has raised the interest rate .25, October 1 my variable CD interest rate goes up to 3.25%. Every time the Fed raises the rate, my variable CD will automatically go up the next month. Should the Fed lower the rate, my rate will also go down... but my interest rate will never go down below the initial 3%.

Variable CD

.