is now the time for 5 year cd?

[LaDolceVita]

If you bought the 5 year 5% non-callable CD on the secondary market with a YTM of 4.9% you paid slightly over par. This means you get the 5% coupon paid twice annually and deposited in your cash account. At maturity you get $100 face value of the CD back which would be slightly lower than what you paid resulting in the 4.9% yield instead of 5%.

It was a new issue at 4.9%. Coupon matched the yield.

 

[frank]

I am seeing short term cd's at 5 percent but most longer term cd's seem to be going down. do you think now is the time to get in at 4.75 for 5 years or wait until we see what happens at the next fed meeting? the way it seems to me is that the people issuing cd's are looking towards a decline in cd rates in late 23 or early 24. what are your thoughts?

 

[Car-Guy]

^^^^
That's a tough question. Even if the fed raises rates 1/4 to 1/2 point (as expected) I'm not sure longer term CD's will go up much,,,,, if any... What matters is what Powell says about the longer term outlook. If he even hints at stopping rate increases, then longer term CD's have probably peaked for now.

 

[Drake3287]

At least here in the Bay Area along with online banks such as Ally and Capital One, rates have been stale since even before the last Fed rate increase. Not even a hiccup. I still haven't seen a 5 year CD at 4.75% yet. Only 12 months.

 

[Sunset]

At least here in the Bay Area along with online banks such as Ally and Capital One, rates have been stale since even before the last Fed rate increase. Not even a hiccup. I still haven't seen a 5 year CD at 4.75% yet. Only 12 months.

I hope you are not one of the people being tricked by Capital One and their low 360 interest rate.

For Ally , I'm betting after the 15th of this month they will raise the savings account rate within a week or two.

 

[Drake3287]

I hope you are not one of the people being tricked by Capital One and their low 360 interest rate.

For Ally , I'm betting after the 15th of this month they will raise the savings account rate within a week or two.

Agree. After this current $500. bonus period is over people will be looking to move money so Ally will be increasing the rates to keep them. Capital One also always follows Ally's rate increases.

 

[Dtail]

I hope you are not one of the people being tricked by Capital One and their low 360 interest rate.

For Ally , I'm betting after the 15th of this month they will raise the savings account rate within a week or two.

Agree. Ally already raised the no penalty CD (30 bps?), so typically the savings rate increase should follow.

 

[John Galt III]

I can't find the post now, but someone posted about moving money inside a 401K into 'fixed interest' in the same 401K, to take advantage of current high rates. I checked all three of my 401K's and it looks like in one of them I am allowed to buy CD's from Fidelity's brokerage. I would have to link to Fid brokerage and sign up for it. The 401K itself is indeed a Fidelity 401K. Hope it all works out. I would be upgrading form a 2.3% stable value fund to a 5 % 5 year CD non callable from the Fidelity brokerage. Sounds too good to be true, but we'll see !

 

[jazz4cash]

…..a 5 % 5 year CD non callable from the Fidelity brokerage. Sounds too good to be true, but we'll see !

I’d love to hear details on this. Share the wealth.

 

[wanaberetiree]

I am seeing cd/s at 3.95 for 5 years. Do you folks think this is where it will stop or will there be further increases? I don't know what to think with the fed commenting about not being as aggressive in the upcoming meetings. what do you think? thanks

frank

Why a CD?

Why not 20 years of treasure bonds?

 

[John Galt III]

I’d love to hear details on this. Share the wealth.

Jazz, I can't access it right now. But it was maturing 2028, 5 %, call protection yes. Minimum investment $15,000. The 'too good to be true' is about whether I am permitted to move money out of my 2.1 % stable value fund into the CD, at all, lol.

 

[Car-Guy]

I can't find the post now, but someone posted about moving money inside a 401K into 'fixed interest' in the same 401K, to take advantage of current high rates. I checked all three of my 401K's and it looks like in one of them I am allowed to buy CD's from Fidelity's brokerage. I would have to link to Fid brokerage and sign up for it. The 401K itself is indeed a Fidelity 401K. Hope it all works out. I would be upgrading form a 2.3% stable value fund to a 5 % 5 year CD non callable from the Fidelity brokerage. Sounds too good to be true, but we'll see !

I know I made such comments in this or a related thread, at some point. I have well over 1m just in fixed assets in my 401k which is actively managed. (ex employer basically pays most/all management fees)... I just got my statement yesterday for 2022... Earned 7.02% for the year.
I fully expect that to continue, or even get better, at least through this year.


EDIT: I found one such post (#765) I made

https://www.early-retirement.org/forums/f28/2022-investment-performance-thread-112573-39.html

 

[24601NoMore]

I am seeing short term cd's at 5 percent but most longer term cd's seem to be going down. do you think now is the time to get in at 4.75 for 5 years or wait until we see what happens at the next fed meeting? the way it seems to me is that the people issuing cd's are looking towards a decline in cd rates in late 23 or early 24. what are your thoughts?

Fed Funds rates most directly impact the short end of the yield curve (0-2 years), not the long. Long end (5-10 years) is PARTLY influenced by FFR, but more by economic outlook.

Not so say another Fed rate increase or two won't affect 5 year CDs, but it's more likely IMHO that we've seen the peak in 5 year yields with possible rare exceptions - like Bank of Pajakistan or something.

What matters to banks and credit unions is where the rates will be over the entire time they have to pay interest. Sure, the Fed may keep rates high for "a while" (read: less than a year) but it's far more likely they will start cutting by this time next year or mid 2024 at latest. So, if you're a bank or CU issuing a 5 year CD/Certificate, would YOU pay 5% knowing this?

4.75 on a 5-year CD is a good rate. There aren't many out there at that yield, and I don't think the next Fed meeting or two is likely to change that, even if they raise another 50 bps between the two.

All JMHO & YMMV..

 

[jazz4cash]

Jazz, I can't access it right now. But it was maturing 2028, 5 %, call protection yes. Minimum investment $15,000. The 'too good to be true' is about whether I am permitted to move money out of my 2.1 % stable value fund into the CD, at all, lol.

I think the TGTBT aspect may be the price! I do see some CD's at Fido that are 5% coupon, 5yr with call protection, but they are priced at premium so the yield is less than 3%. Some others have lower coupons are ~3.5% yield.

 

[John Galt III]

I think the TGTBT aspect may be the price! I do see some CD's at Fido that are 5% coupon, 5yr with call protection, but they are priced at premium so the yield is less than 3%. Some others have lower coupons are ~3.5% yield.

Ah, thanks for the heads up !

 

[Dtail]

Fed Funds rates most directly impact the short end of the yield curve (0-2 years), not the long. Long end (5-10 years) is PARTLY influenced by FFR, but more by economic outlook.

Not so say another Fed rate increase or two won't affect 5 year CDs, but it's more likely IMHO that we've seen the peak in 5 year yields with possible rare exceptions - like Bank of Pajakistan or something.

What matters to banks and credit unions is where the rates will be over the entire time they have to pay interest. Sure, the Fed may keep rates high for "a while" (read: less than a year) but it's far more likely they will start cutting by this time next year or mid 2024 at latest. So, if you're a bank or CU issuing a 5 year CD/Certificate, would YOU pay 5% knowing this?

4.75 on a 5-year CD is a good rate. There aren't many out there at that yield, and I don't think the next Fed meeting or two is likely to change that, even if they raise another 50 bps between the two.

All JMHO & YMMV..

Agree. Just locked in a 5 year CD for my mom at less than 5%.

 

[COcheesehead]

I got a 4.95% 5 year non callable CD at Fidelity, but it was back on November 16th - the “golden” age of yields. It was even discussed on here in the bond thread.

 

[Earl E Retyre]

Agree. Ally already raised the no penalty CD (30 bps?), so typically the savings rate increase should follow.

Thanks for letting me know.

 

[pletal]

Agree. Just locked in a 5 year CD for my mom at less than 5%.

Probably a great idea. Anything above 4.4 does it for me right now

 

[John Galt III]

I know I made such comments in this or a related thread, at some point. I have well over 1m just in fixed assets in my 401k which is actively managed. (ex employer basically pays most/all management fees)... I just got my statement yesterday for 2022... Earned 7.02% for the year.
I fully expect that to continue, or even get better, at least through this year.


EDIT: I found one such post (#765) I made

https://www.early-retirement.org/forums/f28/2022-investment-performance-thread-112573-39.html

If it was you who clued me in to the possibility of having CDs, or other 'fixed interest' investments in a 401K, other than stable value funds, then thanks for the tip ! I am going to check out whether they allow CDs in my 401 Ks. There is a chance I can snag some CDs in one of my Fidelity-managed 401Ks, by signing up for the brokerage account there, and linking it to the 401K. Lots of rules to read, then actually try it, and see what happens.

 

[frank]

I know I made such comments in this or a related thread, at some point. I have well over 1m just in fixed assets in my 401k which is actively managed. (ex employer basically pays most/all management fees)... I just got my statement yesterday for 2022... Earned 7.02% for the year.
I fully expect that to continue, or even get better, at least through this year.


EDIT: I found one such post (#765) I made

https://www.early-retirement.org/forums/f28/2022-investment-performance-thread-112573-39.html

I have been reading on the local facebook version of vanguard folks that some have been putting 1 million in wellesley and showing returns of 89k to 100k in the last couple of prior years. I don't know if this is true. if it is I wish someone would share the secret of how they are doing it. my wellesley and wellington are down for last year. I assume what they are saying is that if you put 1mil in wellesley and let it set, collecting only the money it makes that would be your take home?

 

[REWahoo]

I have been reading on the local facebook version of vanguard folks that some have been putting 1 million in wellesley and showing returns of 89k to 100k in the last couple of prior years.

I think you've identified the problem.

Anyone can claim outrageous returns on a social media site, no facts or accuracy required.

 

[Car-Guy]

I have been reading on the local facebook version of vanguard folks that some have been putting 1 million in wellesley and showing returns of 89k to 100k in the last couple of prior years. I don't know if this is true. if it is I wish someone would share the secret of how they are doing it. my wellesley and wellington are down for last year. I assume what they are saying is that if you put 1mil in wellesley and let it set, collecting only the money it makes that would be your take home?

I don't know enough about the Wellesley/Wellington funds to compare them to my companies managed fixed income fund. I can say, that I was only getting about 3% return rates over the past several years (even over the last decade) but it was pretty steady at that rate. However, last year it jumped to 7%. (Actually 7.02 at final count) That is the highest I've ever seen it in the ~40 years I've been in the "plan". I just looked at the various equity fund rates available in the plan and it looks like they were all down between ~15 to 22% for 2022. In other words, it was a really good (exceptional) year to be in fixed income.

I have no idea what the plans equity funds will do this year, but I'm pretty confident the fixed income fund will generate as much or more in 2023 over what it did in 2022. Good enough for me to go all in! If I could, I'd move my IRA money there too, but they won't allow it.

 

[frank]

no 5yr cd/s anywhere at close to 5%. I can't find any and I thought they would be there by now. anyone think we are at the max cd rates?

 

[Jenna]

no 5yr cd/s anywhere at close to 5%. I can't find any and I thought they would be there by now. anyone think we are at the max cd rates?

Schools First Federal Credit Union-5 year 4.25+ depending on the amount.