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Old 05-21-2020, 08:27 AM   #461
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Originally Posted by brewer12345 View Post
Google "negative convexity."
Whatís negative convexity?
Most fixed-income bonds or securities have a positive convexity, which roughly means the price moves in the opposite direction to interest rates. But mortgage-backed securities have negative convexity. Their price tends not to rise as quickly, and can even drop, when Treasury and other market rates go down. Thatís because the people holding the underlying mortgages are more likely to prepay and refinance into a lower rate. When that happens, the duration of the securities is shortened.

Thanks Brewer,

Rich
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Old 05-21-2020, 08:54 AM   #462
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I’ve been thinking about GNMAs and as long as interest rates stay low, they are fine. The gotcha is no one knows when interest rates will rise again.

Anyway, my core bond funds have plenty, so I don’t need to add.
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Old 05-21-2020, 08:57 AM   #463
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OK, I will try (Again) to get this thread back on track.

American 1 Credit Union 5-Year IRA CD Is A Rate Leader

5-year IRA CD, 2.27% APY, $50 min deposit;
5-year CD, 2.00% APY, $500 min deposit.
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Old 05-21-2020, 10:34 AM   #464
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Iíve been thinking about GNMAs and as long as interest rates stay low, they are fine. The gotcha is no one knows when interest rates will rise again.

Anyway, my core bond funds have plenty, so I donít need to add.
But mortgage spreads over treasuries are elevated, so if they come down you will get prepaid in a lower rate environment. Up to the buyer to decide if the extra yield is worth the risk, of course.
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Old 05-21-2020, 10:44 AM   #465
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OK, I will try (Again) to get this thread back on track.

American 1 Credit Union 5-Year IRA CD Is A Rate Leader

5-year IRA CD, 2.27% APY, $50 min deposit;
5-year CD, 2.00% APY, $500 min deposit.
Six months ago, who would have thought that a 2.00% or 2.25% 5-year CD would be looking good!

https://www.american1cu.org/rates

I'm fully invested so I didn't check into the membership requirements.
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Old 05-23-2020, 09:30 AM   #466
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There are no catches - Capital One is good when it comes to bonus offers. Also be aware, your balance just needs to be maintained through the 90 day period. On day 91, you can move the money out, regardless if they credit the bonus immediately (which in the past they have done very quickly), or up to 60 days later.

The effective interest rate is 5.5% over the bonus period. You're collecting 1% in 3 months, which is 4% effective. Then add on the 1.5% yield for the account and you have 5.5%. You get 2.5% if you leave the money there for a year and collect the amount shown in their chart. Still very good overall, assuming they keep the account at 1.5%, which is unlikely - it will continue heading lower.

Put your money in, leave it there for the 90 days, pull it out, and put it towards a different bank promo offer. Churn through the offers to compound the high effective rate the bonuses produce.
I had their checking account a couple of years ago so I opened the savings account on May 15th for the $500 offer. I initiated the transfer from Capital to my external account on May 20th. It's showing May 27th as the date when the funds will be available. Since their terms and conditions say funds must be deposited within 10 days of opening the account I'm wondering if the May 20th transfer date will be good enough here or will I be outside of the 10 day window based on the May 27th funds availability date? In which case I'd rather pull the money out now and look for another option.
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Old 05-23-2020, 11:51 AM   #467
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Only way to know is to call and ask them.
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Old 05-23-2020, 01:14 PM   #468
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I just did, he said if the account doesn't automatically close due to no activity within 10 days then I *should be fine*. I asked a couple of different ways and he said he thinks I'll qualify for the reward lol. Doesn't give me the warm and fuzzy I was looking for but what are ya gonna do?
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Old 05-30-2020, 05:49 AM   #469
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Iíve been using Dominion Energy Reliability Investment (DERI) for over a year now. Not FDIC insured, but so far rates have been very competitive. Before the COVID collapse, greater than $50k was @ 2.7%, now itís at 2.0%, so rates are not guaranteed for any length of time. Be aware that when they post interest, they subtract federal tax, so the taxes amount is not compounding through the year, somewhat lowering the actual taxed return. I never investigated if the taxes had to be subtracted or if it was just a default.
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Old 05-30-2020, 08:17 PM   #470
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Iíve been using Dominion Energy Reliability Investment (DERI) for over a year now. Not FDIC insured, but so far rates have been very competitive. Before the COVID collapse, greater than $50k was @ 2.7%, now itís at 2.0%, so rates are not guaranteed for any length of time. Be aware that when they post interest, they subtract federal tax, so the taxes amount is not compounding through the year, somewhat lowering the actual taxed return. I never investigated if the taxes had to be subtracted or if it was just a default.
Not bad at all. How does the interest accrue on this investment?
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Old 05-31-2020, 04:08 AM   #471
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My husband and I just opened Capital One 360 accounts for the 500 bonus. They said we could each do it for 1000 total. I didn't think they were going to allow it, but figured I would ask. We did open each in our own name. Has anyone tried this and succeeded?
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Old 05-31-2020, 05:54 AM   #472
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Yup. We did exactly that in mid-May.
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Old 05-31-2020, 07:43 AM   #473
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Unfortunately this bonus is not available to those who have taken advantage of it at any time since 2016. We've done it twice, capturing $1,000 each time. Love to do it again.
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Old 05-31-2020, 08:31 AM   #474
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Iíve been using Dominion Energy Reliability Investment (DERI) for over a year now. Not FDIC insured, but so far rates have been very competitive. Before the COVID collapse, greater than $50k was @ 2.7%, now itís at 2.0%, so rates are not guaranteed for any length of time. Be aware that when they post interest, they subtract federal tax, so the taxes amount is not compounding through the year, somewhat lowering the actual taxed return. I never investigated if the taxes had to be subtracted or if it was just a default.
It's more than simply not being FDIC insured - you are putting your money into Dominion unsecured floating rate notes - essentially unsecured bonds/debt of Dominion. You are a creditor of Dominion, have standing above common shareholders but below all secured creditors.

Quote:
Risks Relating to the Notes

ē An investment in the Notes does not create a bank account or depositor relationship between you and Dominion Energy or The Northern Trust Company, as the agent bank.

ē The Notes are not equivalent to a deposit or other bank account and are not subject to the protection of Federal Deposit Insurance Corporation (FDIC) regulation or insurance or any other insurance.

ē All of the money you invest will be used to purchase Notes for you. All interest earned on your Notes will be reinvested monthly in additional Notes for your investment. The Notes are not a money market fund, which is typically a diversified fund consisting of short-term debt of many issuers. The Notes are not subject to regulation under the Investment Company Act of 1940, as amended. Consequently, you will not have the benefit of federal laws and regulations designed to help maintain liquidity and a stable share price and set standards for credit quality, diversification and for maturity of individual securities and the overall portfolio.

ē The Notes are not subject to the requirements of the Employee Retirement Income Security Act of 1974, as amended.

ē The Notes are not a brokerage account with Georgeson Securities Corporation or any other broker-dealer and are not protected by the Securities Investor Protection Corporation under the Securities Investor Protection Act of 1970.

ē Dominion Energy has not requested, and does not anticipate receiving, a rating for the Notes from any rating agency.

ē The interest rate paid on investments in the Notes may not provide a basis for comparison with bank deposits or money market funds, which may use a different method of calculating yield, or other investments which pay a fixed yield for a stated period of time. The interest rate also does not necessarily bear any relation to the risks associated with or changes in our creditworthiness, credit rating or financial condition and may not compensate you for any increase in credit risk of investment in Notes.

ē Although you may redeem your investment in the Notes at any time in whole or in part, in the manner explained in this prospectus, you are not able to transfer your investment in the Notes to someone else. The Notes are not listed on any securities exchange, and no secondary market for the Notes currently exists nor will one develop in the future. Consequently, there is no public market valuation of the Notes to assist you in evaluating the Notes or the yield earned.

ē The Notes are unsecured debt obligations of Dominion Energy, Inc. Only the assets of Dominion Energy, Inc. are available to pay the principal and interest on the Notes.

ē Dominion Energy, Inc. is a holding company, and we operate our businesses through our subsidiaries. Thus, our ability to meet our obligations under the Notes is dependent on the earnings and cash flows of those subsidiaries and the ability of those subsidiaries to pay dividends or to advance or repay funds to Dominion Energy. In addition, the rights that Dominion Energy and its creditors would have to participate in the assets of any such subsidiary upon the subsidiaryís liquidation or recapitalization will be subject to the prior claims of the subsidiaryís creditors.

ē Holders of Notes will generally have a junior position to claims of creditors of our subsidiaries, including trade creditors, debt holders, secured creditors, taxing authorities, guarantee holders and any holders of preferred stock. In addition to trade debt, certain of our operating subsidiaries have ongoing corporate debt programs used to finance their business activities. As of December 31, 2018, on a consolidated basis (including securities due within one year and credit facility borrowings), we had approximately $35.1 billion of outstanding debt, of which approximately $21.3 billion was subsidiary debt, excluding SCANA. As of December 31, 2018, SCANA had approximately $6.8 billion principal amount of outstanding long-term debt (including securities due within one year and credit facility borrowings).

ē The Notes are not guaranteed, endorsed or insured by any of our subsidiaries or any financial institution or government entity. Dominion Energy does not maintain reserves for its obligations under the Notes. There is a risk that Dominion Energy will be unable to meet interest payments or repay principal on the Notes. You may lose all or part of your investment, including accrued interest, if Dominion Energy is unable to pay its debts, enters bankruptcy or seeks protection from its creditors.

ē You will not be able to exchange your Notes for any other securities of Dominion Energy.
https://www.sec.gov/Archives/edgar/d...9220d424b5.htm
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Old 05-31-2020, 09:42 AM   #475
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Originally Posted by Perryinva View Post
Iíve been using Dominion Energy Reliability Investment (DERI) for over a year now. Not FDIC insured, but so far rates have been very competitive. Before the COVID collapse, greater than $50k was @ 2.7%, now itís at 2.0%, so rates are not guaranteed for any length of time. Be aware that when they post interest, they subtract federal tax, so the taxes amount is not compounding through the year, somewhat lowering the actual taxed return. I never investigated if the taxes had to be subtracted or if it was just a default.
Since you like to gamble a bit, why get such a low rate. Why not nearly 9%
By gamble, I mean this is not a bond, it's similar to a stock, as you are risking your money.

Something else with approximately the same risk would be preferred shares (you have claim above common shareholders).
Enbridge has been around for a long time.

https://www.marketwatch.com/investing/stock/ebbnf
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Old 05-31-2020, 11:04 AM   #476
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Iíve been using Dominion Energy Reliability Investment (DERI) for over a year now. Not FDIC insured, but so far rates have been very competitive. Before the COVID collapse, greater than $50k was @ 2.7%, now itís at 2.0%, so rates are not guaranteed for any length of time. Be aware that when they post interest, they subtract federal tax, so the taxes amount is not compounding through the year, somewhat lowering the actual taxed return. I never investigated if the taxes had to be subtracted or if it was just a default.
These are interesting. Duke Energy has a similar offering. They are demand notes.

These are not comparable to FDIC insured accounts but I think can be considered for your next tier of cash. It looks like the rate floats but not the value.

These are debt, they are not like preferred stock or any other equity.
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Old 05-31-2020, 11:39 AM   #477
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Seems akin to commercial paper sold to the public. Interesting idea.
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Old 05-31-2020, 12:00 PM   #478
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Seems akin to commercial paper sold to the public. Interesting idea.
It's being used as a cash/CD/MM alternative, with none of the protections. How much would you have to "invest" to make it worth doing? If we're talking about a cash/savings/MM account where I keep my $10,000 that I use for monthly expenses, whether I get 2% or 0% is of no concern to me. That I get anything is a win. Here, I'll take 0% with full protection.

If I have $100,000 to keep in this account, why will I put this amount fully at risk in an unsecured 2% yielding investment in a utility company? Why not simply buy the earliest maturity secured bond they offer? It gets down to the difference in cash/CD/MM versus an investment...which this Dominion account is.
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Old 05-31-2020, 01:17 PM   #479
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I dunno. Current brokered CD rates at Fidelity are pathetic... 0.3% for 9 months to 2 years. VMMXX has an SEC yield of .34% and a distribution yield of .42%.

With the tiered structure on $100k you would yield 1.915%... so a 1.615% premium over CDs for a BBB+ credit. I'm not advocating these but it doesn't seem like they are horrible to me as long as the buyer understands the credit risk involved compared to a CD or MM.

FWIW, their 4/1/2021 maturity corporate bond (D4341370) is currently yielding .698%
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Old 05-31-2020, 02:20 PM   #480
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It's been my contention for some time now that folks are underpricing risk, and I still believe that is the case. An ultra-low interest rate environment will do that. There is a point where it makes sense to pass and cash is your best option - even if you are getting 0% on it.
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