End of Year CD Deals

[Cayman]

Friar - thanks for sharing the 15 month CD info. I'll bite. Getting closer to the inflation rate... woooeee.

[brewer12345]

Quote:

Originally Posted by friar1610 Navy Federal Credit Union just announced a 15 month 2.25% APY. $50 min, $50K max. Additional deposits allowed subject to $50K max. I realize not everyone is eligible for membership. Navyfcu.org

Thanks for pointing that out. I have a CD maturing early next year so I opened a $100 15 month CD as a place holder and that way I can tip the maturing CD proceeds in if I cannot find anything better.

[MBSC]

Quote:

Originally Posted by audreyh1 Online banks have already been offering some better deals on CDs this year such as the Ally Bank 1.5% 11 month no penalty CD.

Ally Bank 11-month no penalty CD is now 1.60% ($25k min).

I have their savings account so when I closed the old 1.50% CD, the funds were immediately available in the savings account to purchase the new CD. The whole process took less than 5 minutes.

[jazz4cash]

Quote:

Originally Posted by brewer12345 Thanks for pointing that out. I have a CD maturing early next year so I opened a $100 15 month CD as a place holder and that way I can tip the maturing CD proceeds in if I cannot find anything better.

The placeholder strategy works great for these NFCU CDs that accept additional contributions. I just opened the 32 month IRA certificate for $50.

[Pilot2013]

Someone help me out. I am getting ready to deposit about $85k in a newly opened Fidelity Cash Management account. As I looked at CD's, there is a CD Ladder modeler which has a 1 year ladder (3 mo - 1.40, 6 mo - 1.50, 9 mo - 1.60 and 12 mo - 1.70).

This seems like a nice way to get an APY of about 1.55, and be able to possibly catch any increases.

Since I am new at this, does anyone know any traps with Fidelity CD investing?

[Mr._Graybeard]

I just opened a money market account with Capital One to collect a $500 bonus they offered on a $50K deposit ... along with the 1.30% interest rate, it looked pretty good. I think it was a targeted offer because we have a Capital One Quicksilver credit card.

There's a $200 bonus available to all new depositors with a MY200 bonus code.

Looking around, it seems like a number of the online banks are pushing cash bonuses for new deposits, particularly those with big credit-card business.

[Sunset]

Quote:

Originally Posted by MBSC Ally Bank 11-month no penalty CD is now 1.60% ($25k min). I have their savings account so when I closed the old 1.50% CD, the funds were immediately available in the savings account to purchase the new CD. The whole process took less than 5 minutes.

Did they pay your total amount of interest due up to the day you switched ?

[jazz4cash]

Quote:

Originally Posted by Pilot2013 Someone help me out. I am getting ready to deposit about $85k in a newly opened Fidelity Cash Management account. As I looked at CD's, there is a CD Ladder modeler which has a 1 year ladder (3 mo - 1.40, 6 mo - 1.50, 9 mo - 1.60 and 12 mo - 1.70). This seems like a nice way to get an APY of about 1.55, and be able to possibly catch any increases. Since I am new at this, does anyone know any traps with Fidelity CD investing?

I wouldn't call it a trap, but some folks don't like brokered CD's which is what Fido offers. They have a decent explanation (pros and cons) in the resource list adjacent to the CD ladder tool.
https://www.fidelity.com/fixed-income-bonds/cds

[Another Reader]

I think you are fine if you buy new issue and hold to maturity, although I just put in an order for one unit as an experiment and have not seen how it works. One issue is that, like most CD turnovers where you do not renew, your money goes to the settlement fund while you figure out where to put it next. I would rather deal with a little bit of illiquidity in an IRA than shift a lot of money around between institutions with an IRA. Doing that is just begging for a screw up you would spend years untangling with the IRS.

For a taxable account, I would just deal directly with the lender.

ETA: I bought a Wells Fargo issued 13 month CD at 1.75 percent. Walking in the door at Wells Fargo, the standard 12 month CD is 0.5 percent. A 9 month special is 0.25 percent, and a 19 month special is 0.45 percent. The Goldman Sachs rates are about the same rate at both Fidelity and the on-line bank for a 12 month CD.

[Pilot2013]

Quote:

Originally Posted by jazz4cash I wouldn't call it a trap, but some folks don't like brokered CD's which is what Fido offers. They have a decent explanation (pros and cons) in the resource list adjacent to the CD ladder tool. https://www.fidelity.com/fixed-income-bonds/cds

I saw that but didn't really see anything ominous, at least that I could tell.

[Sunset]

Quote:

Originally Posted by jazz4cash I wouldn't call it a trap, but some folks don't like brokered CD's which is what Fido offers. They have a decent explanation (pros and cons) in the resource list adjacent to the CD ladder tool. https://www.fidelity.com/fixed-income-bonds/cds

I just read this as I'm interested in learning a bit about bonds.

"Purchases (and sales) of secondary CDs incur a trading fee of $1 per CD (1 CD = $1,000 par value)."

Does this mean if I buy a $50,000 bond, the trading free would be $50 to buy and later $50 to sell it ?

[Al18]

Sunset,
$1 CD = $1,000 par value applies if you trade a secondary CD. In addition to this trading fee, if you're selling the CD you will also receive less than the initial value of the CD. All this applies if you sell the CD before maturity.

Lastly, interest on a brokered CD does NOT compound - it simply gets deposited in your settlement account. If you invested $10000 in a 5 year, 2.5% CD - you would see $125 deposited in your settlement account every 6 months for 5 years.

[njhowie]

Quote:

Originally Posted by Al18 In addition to this trading fee, if you're selling the CD you will also receive less than the initial value of the CD. All this applies if you sell the CD before maturity.

Not necessarily.

If interest rates have gone down since purchasing the CD, then the amount received for selling before maturity could very well be higher than the initial value of the CD. Additionally, regardless of the interest rates, the seller receives accrued interest through the settlement date of the trade.

A few other thoughts/points:

1. For those interested in short term CDs or looking at the high yield accounts from Capital One and others, check out DollarSavingsDirect.com (Emigrant Bank). They are paying 1.5%. I've been gradually funneling funds there for a few months now and have been very happy.

2. For those who have the time to watch the secondary offerings from Fidelity, it is definitely worth it. I do this regularly and routinely find CDs paying anywhere from 0.05% to 0.3% above the new issue rates - even after the $1/CD commission. Finding 0.3% above the new issue rate was a gift and unexpected, but you can always find better ones than new issue.

3. Though I haven't seen any in the secondary offerings from Fidelity, multi-step coupon CDs are available through the secondary market from Etrade. Granted, any really good ones may be called prior to maturity, but even owning them for the reduced period to a potential call can provide really good returns - well above new issue rates. Note, when purchasing secondary market CDs from Etrade, like their bond commissions, though they charge $1/CD, they have a $10 minimum commission - which is a slight consideration if you're looking for less than quantity 10.

[njhowie]

Quote:

Originally Posted by Al18 Lastly, interest on a brokered CD does NOT compound - it simply gets deposited in your settlement account. If you invested $10000 in a 5 year, 2.5% CD - you would see $125 deposited in your settlement account every 6 months for 5 years.

In a falling interest rate environment, it may be beneficial to have the interest automatically added and compounded - the yield on the reinvested interest is at a rate higher than what would currently be available for new issue CDs at the time. However, in a rising interest rate environment, as we are currently in, having the interest paid to the settlement account is likely the better result, as the funds can be reinvested in new higher yield CDs.

Brokered CDs may pay interest monthly, quarterly, semi-annually, or at maturity.

[Pilot2013]

Quote:

Originally Posted by Sunset I just read this as I'm interested in learning a bit about bonds. "Purchases (and sales) of secondary CDs incur a trading fee of $1 per CD (1 CD = $1,000 par value)." Does this mean if I buy a $50,000 bond, the trading free would be $50 to buy and later $50 to sell it ?

Reading this, it seems New Issue don't have the fee?

Brokered CDs from Fidelity
Fidelity offers brokered CDs through two main venues—as new issue offerings and from the secondary market. Investors typically will see 50–100 new issue offerings and as many as 2,000 secondary offerings at any point in time. New issue offerings are typically sold at par and investors do not pay a trading fee to purchase them. Purchases (and sales) of secondary CDs incur a trading fee of $1 per CD (1 CD = $1,000 par value).

[njhowie]

Quote:

Originally Posted by Pilot2013 Reading this, it seems New Issue don't have the fee?

Yes, that is correct.

[Pilot2013]

Account funded, and built 1 year CD Ladder yesterday. No fees, rates were 1.40% for 3 month, climbing up to 1.75% for 12 month.

[njhowie]

Good job.

With the way the Fed is progressing with their rate hikes, it's a good idea to keep CDs/bonds on a short leash. Personally, I'm sticking to nothing further out than 2 to 3 years until longer term rates get to at least 4%. That doesn't look to be happening any time soon, and the spread for buying longer term today is not justified. The yield curve basically goes flat at 5 years and beyond. Who would lock in 3.0% for 10 years today when you can get 2.6% for 5 years? Even that is questionable when 2 years is at 2.1%.

When your 3 month matures, roll it out 12 months, and keep doing the same for the others - you'll be riding the interest rate hikes higher keeping the ladder in place. It's exactly what I'm doing with my CDs and municipal bonds. The spreads have gotten so narrow, that I've almost stopped buying new (taxable) municipal bonds - the CD rates for equivalent maturity are very close and in some cases even more. The market is beginning to get a little goofy.

[jazz4cash]

Navy Federal Credit Union has a 15 mo Share CD @ 2.25. Max balance is 50k.
The 32 mo IRA CD @ 2.75 is still availabe.
Both have an add-on feature.

[Lion Rock]

Ally's 12-month high yield CD now at 2%, offer good til 1/2/2018. No minimum.

https://www.ally.com/bank/high-yield...D=BNR400001810