Why does JP Morgan offer so many callable CDs?

[Brook2]

I notice a pattern that JP Morgan offers a lot of callable CDs, and then always calls them really early. (For example: 2 years callable, and then call in 6 months). They seem to be a company that consistently does this. It’s as if they have no idea how much money they will need. Your theories?

 

[audreyh1]

Good question. It’s annoying because that clutters up the CD offerings in my Fidelity views. Often the rates offered are just a tiny bit above the available non-callable CDs.

I have theorized that JP Morgan has a particular game plan and I suppose it’s working very well for them.

But I’m not buying!

 

[frayne]

It's called hedging and they are good at it.

 

[RetiredHappy]

I don't buy callable CDs for the reason that they will call back the CDs when rates go down. You can't win if you buy them. If rates go up, you are stuck with them.

 

[Car-Guy]

It's called hedging and they are good at it.

+1 Pay a little more upfront and call 'em if rates drop too much too soon.

 

[Montecfo]

Because they can.

They expect lower rates and know people will buy them anyway.

Fish in a barrel.

 

[Gumby]

What's the problem if you find the yield to the earliest call date acceptable for your purposes? I just buy them assuming JPM will call as soon as they can.

 

[pb4uski]

+1 and then if it sticks it is gravy.

 

[audreyh1]

What's the problem if you find the yield to the earliest call date acceptable for your purposes? I just buy them assuming JPM will call as soon as they can.

Prefer not to deal with it, that’s all. They don’t pay me enough extra to cover the hassle. I haven’t been buying brokered CDs anyway for many+ months as Treasuries and direct bank CDs have been offering better rates. I don’t go beyond 18 months.

 

[Ready-4-ER-at-14]

re callable CDs
Audrey:" Prefer not to deal with it, that’s all. They don’t pay me enough extra to cover the hassle. I haven’t been buying brokered CDs anyway for many+ months as Treasuries and direct bank CDs have been offering better rates. I don’t go beyond 18 months."

Interesting comment I have just been doing quick scans at highest rates for various classes of fixed income and CD's were listed higher, but of course when you went to individual offerings the significantly higher were for callable CD's.

Wow I feel like i was giving myself the ole comparing apples to oranges bait and switch because i was lazy in my due diligence by making assumptions. Thanks for the heads up.

 

[jldavid47]

What's the problem if you find the yield to the earliest call date acceptable for your purposes? I just buy them assuming JPM will call as soon as they can.

I agree and I do the same. I spread my fixed income $$$ around a lot and having a small portion in these JPM CDs is fine when it makes sense.

I also buy callable agency bonds and what is interesting is that the high-yield (6%+) 10-year and 20-year agency bonds I have are not being called at all. The shorter-term ones (2 years or so) yielding above 5.5% are. Go figure.

 

[MarieIG]

Prefer not to deal with it, that’s all. They don’t pay me enough extra to cover the hassle. I haven’t been buying brokered CDs anyway for many+ months as Treasuries and direct bank CDs have been offering better rates. I don’t go beyond 18 months.

I also prefer not to deal with it. I want to know precisely when the CD will mature.

 

[Gumby]

Perhaps the fact that I buy them in my Roth makes me indifferent as to their precise maturity date, since I don't have to worry about the timing of taxable income.

 

[RetiredAndLovingIt]

I have a JP-Morgan 5.45% CD that's callable today and I've not heard anything yet so I assume it's not being called. I thought it would be for sure but happy that it's not.

 

[MarieIG]

Perhaps the fact that I buy them in my Roth makes me indifferent as to their precise maturity date, since I don't have to worry about the timing of taxable income.

Holding CDs in a retirement account makes very good sense for many of us (myself included). However, I got a bit carried away with myself when the interest rates went up and bought some CDs (and treasuries) in taxable accounts.

 

[Earl E Retyre]

This is one of the reasons I have been buying brokered CDs that are on the secondary market with a good yield-to-worst but a low-ish coupon. The low-ish coupon means the CD likely will not get called and will go to maturity. And, since you buy these CDs at a discount, you will earn a lot more then yield-to-worst in the unlikely scenario that a CD does get called. So it is a win whether it gets called or not. I also find that I can get better rates lately off the secondary market.