|
07-26-2006, 11:42 AM
|
#1
|
Recycles dryer sheets
Join Date: Oct 2003
Posts: 452
|
CDs going up or down ?
I have 2 CDs coming due soon, 1 in Sept and 1 in Oct.
Best rates are generally for 1 year, but found 5.75% for 2 years at State Farm Bank. Since the rates are lower, in general, for more than 1 year, does that mean that the banks are betting that interest rates will begin falling in the not too distant future - perhaps, when the Fed quits raising rates ? The banks don't want to give out a good rate for, say 3 to 5 years, knowing that rates are headed lower.
They want to suck you into a great rate for 1 year and then screw you when you renew.
.
ps: I know most of you out there don't use CDs, but I have a good reason for buying them at the moment. I'm seeking a guaranteed rate so that in about 2.5 years I can payoff the mortgage. No guarantees with the stock market. This is specifically allocated monies to be used for the mortgage payoff. So, at the end of the 2.5 years, my mortgage will be down to just about the value of the CDs.
|
|
|
|
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!
Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!
You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!
|
Re: CDs going up or down ?
07-26-2006, 11:48 AM
|
#2
|
Recycles dryer sheets
Join Date: Jun 2006
Posts: 473
|
Re: CDs going up or down ?
Quote:
Originally Posted by bennevis
The banks don't want to give out a good rate for, say 3 to 5 years, knowing that rates are headed lower. They want to suck you into a great rate for 1 year and then screw you when you renew.
|
Whenever you lock your money in a CD, you take your chances with interest rates over the period of time that you have it locked for. Unless you get one of those "one penalty-free withdrawal" CDs, I suppose. On the plus side, you are not exposed to the risks that stock and bond investors have to worry about
|
|
|
Re: CDs going up or down ?
07-26-2006, 11:53 AM
|
#3
|
Recycles dryer sheets
Join Date: Oct 2003
Posts: 452
|
Re: CDs going up or down ?
Scrooge,
I guess I'm asking whether to buy a 1 year CD and take my chance 1 year later,
or, bite the bullet so to speak and buy a 2 year or 30 month CD at a lower rate ? What's your opinion?
|
|
|
Re: CDs going up or down ?
07-26-2006, 12:15 PM
|
#4
|
Recycles dryer sheets
Join Date: May 2006
Posts: 465
|
Re: CDs going up or down ?
I don't think there is a simple answer to your question.* Noone knows which way rates are headed.* Current rates have likely already factored in at least one more rate hike by the Fed, and after that happens, it's anybody's guess.* Personally, 5.75% for two years sounds pretty good to me if your not going to need the money for anything between now and then.
FYI, last week, we rolled a mature CD into a new 18 month CD paying 5.5%.* Just today another local bank anounced an 18 month rate of 5.76%. * I gotta learn to ignore rates until our next CD matures in six months.
|
|
|
Re: CDs going up or down ?
07-26-2006, 12:41 PM
|
#5
|
Recycles dryer sheets
Join Date: Jun 2006
Posts: 473
|
Re: CDs going up or down ?
Quote:
Originally Posted by bennevis
Scrooge,
I guess I'm asking whether to buy a 1 year CD and take my chance 1 year later,
or, bite the bullet so to speak and buy a 2 year or 30 month CD at a lower rate ?* What's your opinion?
|
Well, as we were discussing a few threads over, I have always been somewhat paranoid (read: very paranoid* ) about inflation, hence very reluctant to lock up my money at a fixed rate of interest. Inflation has a very unpleasant habit of sneaking up on you. But that's a visceral reaction more than anything else.
|
|
|
Re: CDs going up or down ?
07-26-2006, 12:51 PM
|
#6
|
Thinks s/he gets paid by the post
Join Date: Apr 2006
Posts: 1,490
|
Re: CDs going up or down ?
5 yr treasuries are just below 5%, 10 yr treasuries are just above 5% ... that suggests to me that a 24 or 30 month CD at 5.75% is a decent bet (especially given the purpose you describe)
|
|
|
Re: CDs going up or down ?
07-26-2006, 12:57 PM
|
#7
|
Thinks s/he gets paid by the post
Join Date: Dec 2003
Posts: 4,459
|
Re: CDs going up or down ?
If you want to predict interest rate moves, take a look at the current yield curve:
link
As you can see, the market expects rates to go up a bit in the next 3 months, but then to go down a bit over the next few years.
Personally, I prefer TIPS to CDs. * The nominal yield on TIPS is equivalent to about 7% right now, and they'll continue to provide an inflation hedge going forward. * The market seems to be betting that inflation will be *very* low in the next few years, but even if the market is right, you're *probably* still looking at close to a 5% nominal yield.
|
|
|
Re: CDs going up or down ?
07-26-2006, 01:31 PM
|
#8
|
Recycles dryer sheets
Join Date: Mar 2006
Posts: 206
|
Re: CDs going up or down ?
Just a few things. Good rates do go out to about 5 years. Check Fatwallet.com cd rate listing.
Current stock market bet is about a 40% chance of a rate hike on Aug 8. Who knows what happens after that - but I am building a CD ladder for a self - annuity (Yes it's the buckets ) and I am betting if this increase happens that it will be the last for a while.
__________________
I'm trying to find myself.* Have you seen me anywhere today?
|
|
|
Re: CDs going up or down ?
07-26-2006, 01:45 PM
|
#9
|
Recycles dryer sheets
Join Date: Oct 2003
Posts: 452
|
Re: CDs going up or down ?
check places like bankrate.com or countrywide; cd rates go down after 1 year
|
|
|
Re: CDs going up or down ?
07-26-2006, 02:01 PM
|
#10
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
|
Re: CDs going up or down ?
If it were me, I would buy a CD or bond that will mature when you expect to need the money. The difference in rates isn't big enough to tempt me to mismatch maturities.
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
|
|
|
Re: CDs going up or down ?
07-26-2006, 02:03 PM
|
#11
|
Thinks s/he gets paid by the post
Join Date: Apr 2006
Posts: 1,490
|
Re: CDs going up or down ?
Quote:
check places like bankrate.com or countrywide
|
fatwallet is more complete (and up to date) http://www.fatwallet.com/t/52/320690/
|
|
|
Re: CDs going up or down ?
07-26-2006, 04:26 PM
|
#12
|
Full time employment: Posting here.
Join Date: Feb 2004
Location: Okanagan Valley
Posts: 808
|
Re: CDs going up or down ?
Quote:
Originally Posted by brewer12345
If it were me, I would buy a CD or bond that will mature when you expect to need the money.* The difference in rates isn't big enough to tempt me to mismatch maturities.
|
I fully agree with a 2 year CD. Interest rate gambles are exactly that - gambles.
|
|
|
Re: CDs going up or down ?
07-26-2006, 07:11 PM
|
#13
|
|
Re: CDs going up or down ?
There are two groups of people as far as prediction of interest rates.
1.) Those that don't know where interest rates are headed.
2.) And those that don't know that they don't know.
|
|
|
Re: CDs going up or down ?
07-26-2006, 07:34 PM
|
#14
|
Thinks s/he gets paid by the post
Join Date: Dec 2003
Posts: 4,459
|
Re: CDs going up or down ?
Quote:
Originally Posted by Cut-Throat
There are two groups of people as far as prediction of interest rates.
1.) Those that don't know where interest rates are headed.
2.) And those that don't know that they don't know.
|
Actually, the market has a pretty good record of predicting short-term rate changes and the federal funds rate (at least since 2000 or so):
|
|
|
Re: CDs going up or down ?
07-26-2006, 07:46 PM
|
#15
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2005
Location: Central MS/Orange Beach, AL
Posts: 9,067
|
Re: CDs going up or down ?
I wonder how many people wished just 2 years ago that they could lock in a cd at 5+ percent. * I know I can't predict where it's going but based on what the 'experts' are saying, it may not be a bad time to lock in for awhile.
__________________
Retired 3/31/2007@52
Investing style: Full time wuss.
|
|
|
Re: CDs going up or down ?
07-26-2006, 08:20 PM
|
#16
|
Thinks s/he gets paid by the post
Join Date: Apr 2006
Posts: 1,490
|
Re: CDs going up or down ?
Quote:
Originally Posted by Cut-Throat
There are two groups of people as far as prediction of interest rates.
1.) Those that don't know where interest rates are headed.
2.) And those that don't know that they don't know.
|
the same can, of course, be said for Fx, the stock market, and commodities (except of course for b33v3r ch33s3 which, as we all know, is going to the moon).* but predicting the next Fed Funds target is reasonably safe as the move is not likely to be more than 25 basis points. today the "market" had about even odds for 5.25 and 5.5.*(and that assumes no unexpected "happenings". that said, if the Fed wanted to make a big splash, it would do what the market did not expect ... sure would be difficult to predict that!
|
|
|
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Thread Tools |
|
Display Modes |
Linear Mode
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|