Best CD, MM Rates & Bank Special Deals Thread 2022 - Please post updates here

[copyright1997reloaded]

Anyone know why they do this?

Because the value of that asset is marked to market. Just because you intend to hold to maturity doesn't mean its underlying value hasn't changed.

 

[11522914]

Not that I question your judgement, I have no idea what the future holds and your situation is undoubtedly different from mine......

But, with inflation at 9+% why lock in money for five years knowing that in real terms it may lose a lot of value? Are people that certain that the Fed will get inflation under control?

I look at the recent Tech bill that started at 76 Billion to build more semiconductors in the USA and is now edging towards 280 Billion dollars.

How can the Fed reduce interest rates or even hold them still in the face of such profligate spending?

Am I missing something?

I certainly agree with you. Which is why outside of buying those under par 4.7 to 6% bonds, I've been purchasing 1-3 months treasuries.
Bought only 6k of 5 year cds.

I never thought I would feel FOMO on cd rates. They've been completely worthless for quite a while now.

Then when I learned about corporate bonds and funds dumping them I thought great, I should be able to get some better rates if I up my risk a tad more.

But that's changed dramatically over the last few weeks.

What Freedom said about 3.5 on fed rates makes sense to me but who knows?

I worked in the grocery business in the late 70s early 80s and saw crazy inflation. My first mortgage was an 11 3/4% negative amortization loan. Only way I could get one at 19 years old. Parents had to co-mortgage too.

Ten years later I sold my house for 3k less than I bought it [emoji848]

I really hope we don't reach that level of inflation.

So I'll just sit back and see what happens and continue to slowly ease into some longer term cds.

I realize I'll never catch the top in interest rates. I'll just slowly average in.

And make sure as best as possible my personal inflation rate stays low.

 

[Chuckanut]

No doubt if brokers simply listed the CD at it's maturity value, somebody would sue them claiming they were publishing misleading information that caused them to keep a CD they would otherwise have sold, or visa versa. They do vary in value so the good, right and accurate thing to do is list the current real value.

Like others I pretty much ignore the value fluctuations since I plan on keeping most CDs until they mature.

 

[Freedom56]

I've never bought a brokered CD (until this week) but I am planning to buy maybe 500k in CD's between now and the end of the year if rates go up like I expect. 4% will do for anything 24 months or less.

So as a test case, I bought a $10k CD to see how it worked at Schwab... Everything went as expected (very easy to do) until the CD posted on my account.

Then I found, I really don't like the way the accounting is done.

So if I buy a share of any stock or an ETF they post it as an asset in my brokerage account in separate categories. I would expect that stock or ETF to change values every day with the rise and fall of their market prices. The CD is posted in a separate category too (as expected) but it has a daily price change too . (Unexpected) So the CD shows my original purchase price (or cost basis) as 10k (as expected) but then, each day, they show the current value of the CD based on what it could be sold for on the secondary market rather than leave it at the original 10k cost basis. This is going to mess up my total account value tracking since I intended to hold my CD's until maturity and not sell on the secondary market.

So if I hold until maturity, I get my 10k back and all interest. So using the secondary market as a valuation of the CD really doesn't mean anything but makes it look like the CD is worth more or less than it really is and it changes daily.

Confused yet?

Anyone know why they do this?

How do other brokerage firms handle the accounting of brokered CD's"? Same as Schwab?

As others have stated, CDs held in brokerage accounts are treated just like bonds/notes or treasuries. There are few things going on when you buy a new issue CD or corporate note. There is a 1-2% commission is built into the price you pay that the broker collects. When you buy those products on the secondary market, the commission is built into the bid/ask spread. Rates are fluctuating every day. When a new issue is announced to the settlement date date of the CD or note, yields on the secondary market for CDs and notes may have moved up or down. The longer the remaining duration of the CD, treasury, or note, the more fluctuation you will see during the period you hold the CD or note. However it will mature or be called at par. To see if you are getting a good yield on a new issue CD or note, always compare it with what they are selling for on the secondary market. When investing in fixed income, always trade off CDs, treasuries, agency notes, high grade corporate notes. The big picture is that you are investing in a product where your principal is returned to you at 100% at maturity or if it is called and you buying these products to generate more income than a money market fund (currently at 1.64%) or rolling 30 day treasury notes (currently at 2.24%).

We are rapidly approaching period where money market funds will provide a higher yield than the distribution yields of medium to longer duration bond ETFs and mutual funds. Money market funds are already yielding more than short duration bond ETFs and mutual funds.

 

[tulak]

I was searching for high-yield savings account and found LendingClub, which is offering 2.07%. I've never heard of them before. They're FDIC insured and look good based on their website. Anyone have any experience with them?

https://www.lendingclub.com/personal-banking/high-yield-savings

 

[pc95]

Anyone have an idea where the 5 year rates will top out at? I'm hoping more than 3.5%.

I am laddering right now. Started at 3.2% then 3.5%, will bite at 3.7%+

The last time rates were approaching or beyond these were late 2018. I have the tail end of a 3.95% 5-year from a smaller regional bank Connexus. If into 4%+ territory may invest larger amounts, maybe sell some equities.

 

[jazz4cash]

But, with inflation at 9+% why lock in money for five years knowing that in real terms it may lose a lot of value? Are people that certain that the Fed will get inflation under control?

What are you proposing instead?
As for me, I am not too concerned about inflation. I have many fixed expenses coming due over the next several years that will not be impacted by inflation. As CDs mature I may break them up to spread out the reinvestment but my main goal is to stick to a disciplined AA and bucket strategy.

The 10 year treasury has dropped dramatically which is being interpreted as a signal that the market believes inflation has peaked.

 

[John Galt III]

Anyone have an idea where the 5 year rates will top out at? I'm hoping more than 3.5%.

Since I am also hoping for 4%, my theory is that 5 year rates will top out at 3.75%, lol. I have already bought in at 3.0% 7 year and 3.5% 5 year at Penfed, and do not regret it.

 

[jazz4cash]

I'm skeptical that they are FDIC insured. My understanding is that they basically make loans to people and businesses who have trouble getting conventional bank loans and then sell you a slice of that loan. Akin to junk bonds IMO.

What are you referring to?

 

[pb4uski]

What are you referring to?

I was referring to tulak's post:

I was searching for high-yield savings account and found LendingClub, which is offering 2.07%. I've never heard of them before. They're FDIC insured and look good based on their website. Anyone have any experience with them?

https://www.lendingclub.com/personal-banking/high-yield-savings

But then clicked on the link that he provided and saw that their website says that they a FDIC insured and thought that perhaps I was confusing them with the P2P lending outfits so I deleted my post.

 

[Chuckanut]

What are you proposing instead?

Good question.

I am thinking that if inflation keeps up at more than 5% a year, interest rates will continue to rise. So locking in 3.4% or whatever for 5+ years may not be a great idea.

I lived through the great inflation of the late 70's and early 80's. I remember CD's and Treasuries in double digits. I hope inflation is rapidly brought under control, but if it isn't, I don't want to see my stash ruined. The current 9% inflation rate reduces the number of loaves of bread I can purchase by 50% in only eight years. Not so good.

My idea (not really a proposal) is to maintain a total market index equity position, and keeping at least 50% of my CD money in shorter term CD's (say two years max) just in case we get prolonged high inflation. FWIW, My current ladder extends out to 18 months. My crystal ball is cracked, I can't read minds, and my time machine is broken. So, I hedge my bets.

 

[jazz4cash]

I think they must’ve added the FDIC feature. I thought they were only P2P lenders also.

 

[jazz4cash]

Best CD, MM Rates & Bank Special Deals Thread 2022 - Please post updates here

Good question.

My idea (not really a proposal) is to maintain an total market index equity position, and keeping at least 50% of my CD money in shorter term CD's (say two years max) just in case we get prolonged high inflation. FWIW, My current ladder extends out to 18 months. My crystal ball is cracked, I can't read minds, and my time machine is broken. So, I hedge my bets.

That is actually pretty consistent with my plans using my IPS but my fixed income ladder goes out 10 years. The only change I am making is to spread out reinvestment. As rates rise (or fall) I will get a rolling average. Using a mix of ibonds, CDs, UST, and MYGA helps also.

I really don’t expect a long period of inflation at these levels and if that happens I’ll probably kick myself. Then again I could pull some levers to buy Treasuries if they get>10%.

EDIT: Sorry for going off topic. I’ll refrain from further OT comments on this thread.

 

[DawgMan]

I have to say I am a little irritated that Marcus did not raise their rate closer to the upper end of the competition (currently at 1.5% after yesterday's bump compared to now 2%+ from others). For the most part, these HYSAs are somewhat of a commodity and you would think they would run a little tighter relative to their yields offered to bring in new customers as well as keep the current ones. They are still 33% below the leaderboard as we sit today. It seems like in the past they were typically one of the leaders. None the less, I am too lazy to open multiple accounts and chase yield every time we have a new front runner.

 

[pb4uski]

I think they must’ve added the FDIC feature. I thought they were only P2P lenders also.

Thanks. That makes me feel better because my recollection also was that they were not FDIC insured.

 

[Ian S]

I have to say I am a little irritated that Marcus did not raise their rate closer to the upper end of the competition (currently at 1.5% after yesterday's bump compared to now 2%+ from others). For the most part, these HYSAs are somewhat of a commodity and you would think they would run a little tighter relative to their yields offered to bring in new customers as well as keep the current ones. They are still 33% below the leaderboard as we sit today. It seems like in the past they were typically one of the leaders. None the less, I am too lazy to open multiple accounts and chase yield every time we have a new front runner.

If you belong to AARP, Marcus gives you an extra 0.10% on the savings account (so it's 1.60% at the moment). I suspect Marcus is just slow to get their interest rate up to that of the competition.

 

[calmloki]

So how does one figure out how much to invest at any one time? I've that problem with interest bearing accounts or stocks, or really any investment. If I have 100k and a bank offers a 3.5% 5 year CD do I stick the whole 100k in? Should I put in 10k and wait a year or a month, losing potential earnings, to see if the rate goes higher? If I nail the highest interest but only have a small portion of my investible cash in it are the tiny high interest earnings big enough to matter at all?

We have a substantial chunk in GTE and similar CDs paying about 3%, but locked up with hefty early withdrawal penalties until the end of 2024. Another amount equal to about 70% of the 3% accounts is busily getting shifted around to the 1.5% interest paying bank accounts du jour - woohoo! I'm getting 1.5% instead of 1.4% - But we could be getting twice that if I just stuck it in GTE - but what if 4.5% or 8% CDs come on the market in 6 months or a year?

How do you decide how much to invest of what you have available?

 

[jazz4cash]

So how does one figure out how much to invest at any one time?

I match it to my expected liabilities. My biggest is around 12k so I'll generally put it into laddered chunks of 12-25k. If I find rates better than 4%, I go double or triple chunks.

 

[Happyras]

If you belong to AARP, Marcus gives you an extra 0.10% on the savings account (so it's 1.60% at the moment). I suspect Marcus is just slow to get their interest rate up to that of the competition.

AND I suspect that their 1% referral bonus limits their overall rate offered to every existing customer. I have been getting this extra 1% for a year now, and the current 2.6% is at par with 3 month T-bills and exceeds all other HYSA.

 

[aja8888]

The 10 year treasury has dropped dramatically which is being interpreted as a signal that the market believes inflation has peaked.

Yeah, maybe the "market" believes this, but the market is not the economy. I believe it's too early to tell if inflation is heading down. And, as we all know, treasury rates are manipulated by the FED.

 

[jazz4cash]

Yeah, maybe the "market" believes this, but the market is not the economy. I believe it's too early to tell if inflation is heading down. And, as we all know, treasury rates are manipulated by the FED.

I agree the market is not the economy. I agree it’s too early to tell. That’s why I am laddering fixed income maturities. I certainly don’t know that treasury rates are manipulated by the Fed. Far from it.

 

[RetiredAndLovingIt]

So how does one figure out how much to invest at any one time? I've that problem with interest bearing accounts or stocks, or really any investment. If I have 100k and a bank offers a 3.5% 5 year CD do I stick the whole 100k in? Should I put in 10k and wait a year or a month, losing potential earnings, to see if the rate goes higher? If I nail the highest interest but only have a small portion of my investible cash in it are the tiny high interest earnings big enough to matter at all?

We have a substantial chunk in GTE and similar CDs paying about 3%, but locked up with hefty early withdrawal penalties until the end of 2024. Another amount equal to about 70% of the 3% accounts is busily getting shifted around to the 1.5% interest paying bank accounts du jour - woohoo! I'm getting 1.5% instead of 1.4% - But we could be getting twice that if I just stuck it in GTE - but what if 4.5% or 8% CDs come on the market in 6 months or a year?

How do you decide how much to invest of what you have available?

Just FYI, assuming you wanted to pull some money from GTE, you have access to all the interest earned so far penalty free. I called them a couple of months ago asking about withdrawal penalties and customer service was kind enough to let me know the interest amount I could pull penalty free if needed.
Navy Federal has the same policy but Alaska USA Credit Union does not.
I ladder so at least one CD with a years expenses is maturing every year but I'm going to change that to at least one every 6 months moving forward. A huge portion of my retirement funds mature in 2023 since they were all locked into 5 Year CD's at over 4% at the time so I had to do it.

 

[aja8888]

I agree the market is not the economy. I agree it’s too early to tell. That’s why I am laddering fixed income maturities. I certainly don’t know that treasury rates are manipulated by the Fed. Far from it.

The FED's tools allow it to manipulate rates. Here is an explanation as to how they do that:

https://www.investopedia.com/articles/economics/08/monetary-policy-recession.asp

In the U.S., The Federal Reserve (The Fed) exists to maintain a stable and growing economy through price stability and full employment – its two legislated mandates.

Historically, the Fed has done this by manipulating short-term interest rates, engaging in open market operations (OMO) and adjusting reserve requirements.

 

[pb4uski]

I dunno... if they can manipluate rates then that would mean that they can manipulate the entire short end of treasury yield curve and I'm skeptical of that... or at least if they do have that capability they are doing a damn lousy job of manipulating the yield curve because right now it is a mess.

 

[aja8888]

I dunno... if they can manipluate rates then that would mean that they can manipulate the entire short end of treasury yield curve and I'm skeptical of that... or at least if they do have that capability they are doing a damn lousy job of manipulating the yield curve because right now it is a mess.

Yes, the yield curve is a mess and the FED has $2.2 trillion of bonds floating back and forth nightly from member banks and favored institutions on repos and reverse repos. This is the liquidity that in the system that has to come out (it was not spent during the Pandemic). Also, what the FED has on the balance sheet is $6 trillion (est) in MBS and treasuries of varied yields that it has to roll off by using QT. That plan is to roll off $90 billion/month starting in September I believe.

It's a mess and the FED has a hard time of controlling rates due to all this liquidity in the system that is bouncing around.

The Fed Funds Rate that is being raised is between the FED and member banks.