CD discussion thread

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evelynmanley
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Re: CD discussion thread

Post by evelynmanley »

MikeG62 wrote: Fri May 13, 2022 3:45 pm
bandoba wrote: Fri May 13, 2022 3:29 pm Ally just sent an email about 2% for 20 month CD. I assume this is not a targeted offer since I see it on Ally's website here https://www.ally.com/go/bank/20m-select ... L400002574
You can get almost 2.0% in a 12-month Treasury. You can redeploy those proceeds a year from now into what seems likely to be a higher rate environment. If you think that is unlikely, then go for a 24-month treasury now at ~2.60%. In addition Treasuries are not taxable at the state and local level.

These bank deals need to get “a lot” more attractive before I’d consider them.
+1, based on the Ken Tumin article I linked above. I just purchased Treasury bills for the first time this week.
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jeffyscott
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Re: CD discussion thread

Post by jeffyscott »

MikeG62 wrote: Fri May 13, 2022 3:45 pm
bandoba wrote: Fri May 13, 2022 3:29 pm Ally just sent an email about 2% for 20 month CD. I assume this is not a targeted offer since I see it on Ally's website here https://www.ally.com/go/bank/20m-select ... L400002574
You can get almost 2.0% in a 12-month Treasury. You can redeploy those proceeds a year from now into what seems likely to be a higher rate environment. If you think that is unlikely, then go for a 24-month treasury now at ~2.60%. In addition Treasuries are not taxable at the state and local level.

These bank deals need to get “a lot” more attractive before I’d consider them.
Brokered CDs are also better than that offer, 2.45% for 18 mo. or 2.9% for 2 year, based on Vanguard's rate overview page.
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LadyGeek
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Re: CD discussion thread

Post by LadyGeek »

The wiki has some background info: Brokered CDs

If you hold a brokered CD in an IRA and need to make an RMD, the CD must be sold to meet the RMD. (That's explained in the wiki as Note 1.)
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Kevin M
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Re: CD discussion thread

Post by Kevin M »

LadyGeek wrote: Fri May 13, 2022 5:54 pm The wiki has some background info: Brokered CDs

If you hold a brokered CD in an IRA and need to make an RMD, the CD must be sold to meet the RMD. (That's explained in the wiki as Note 1.)
This is only true if you don't have other assets in the IRA that can be used to satisfy the RMD. I've held brokered CDs in and IRA subject to RMDs, and have never had to sell one before maturity. Generally I would not buy a brokered CD in an IRA if I would need to sell it before maturity to satisfy an RMD.

Note that the Wiki article does not discuss explicitly the biggest issue with brokered CDs (compared to Treasuries), which is that the bid/ask spread can be quite large, like 1% or more (but sometimes less), so if you sell before maturity, you probably will lose much more than Treasuries to the bid/ask spread. Also, there often is no bid quote, and if there's not, you'll have to have contact the broker to solicit bid quotes. Years ago I think I did this, and had to do it by phone, but I think now with some brokers you can request bid quotes online.

Other than that, brokered CDs are subject to the same term risk as Treasuries or any other bond or bond fund. I really don't see any need for a big warning about this in the Wiki article. The warning should be about the potentially large bid/ask spread if selling before maturity.

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Re: CD discussion thread

Post by LadyGeek »

If you or anyone else has suggested text, I'll be more than happy to revise the article. Cite sources if needed.
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Re: CD discussion thread

Post by Kevin M »

LadyGeek wrote: Fri May 13, 2022 7:58 pm If you or anyone else has suggested text, I'll be more than happy to revise the article. Cite sources if needed.
No thanks. I've been down the wiki editor road before, and ended up not enjoying it very much. I've provided my input already; anyone else can feel free to take it and edit the Wiki article, or leave it.

My source is experience and personal research. I've dealt extensively with CDs of both varieties for more than 10 years (and to a lesser extent with brokered CDs for some years before that), have thousands of BH posts about them, and have previously done analysis on the bid/ask spreads. Anyone can look at the bid/ask spreads at a broker to see what I'm talking about.

Does whoever wrote that warning about have any reason to believe that CDs have any more or less term risk (aka interest-rate risk) than other bonds? I'd like to see the "sources" for that. I honestly would (not intending to be snarky).

Thanks,

Kevin
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Re: CD discussion thread

Post by hudson »

PENFED https://www.penfed.org/
2.75% APY* for 5 Years
2.25% APY* for 3 Years
1.75% APY* for 18 Months
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Re: CD discussion thread

Post by MikeG62 »

hudson wrote: Wed May 18, 2022 6:23 am PENFED https://www.penfed.org/
2.75% APY* for 5 Years
2.25% APY* for 3 Years
1.75% APY* for 18 Months
Treasuries still seem to offer better value. For example, on Monday I bought (in the secondary market) a Treasury bill maturing in Dec 2022 at a yield of 1.50% and a Treasury bond maturing in May of 2023 at a yield of 2.12%.

I'm thinking either CD's rates will continue to creep up to become competitive with Treasuries or Treasury yields will decline. If I had to guess which one, I'd bet the former is more likely than the latter.
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hudson
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Re: CD discussion thread

Post by hudson »

MikeG62 wrote: Wed May 18, 2022 6:38 am
hudson wrote: Wed May 18, 2022 6:23 am PENFED https://www.penfed.org/
2.75% APY* for 5 Years
2.25% APY* for 3 Years
1.75% APY* for 18 Months
Treasuries still seem to offer better value. For example, on Monday I bought (in the secondary market) a Treasury bill maturing in Dec 2022 at a yield of 1.50% and a Treasury bond maturing in May of 2023 at a yield of 2.12%.

I'm thinking either CD's rates will continue to creep up to become competitive with Treasuries or Treasury yields will decline. If I had to guess which one, I'd bet the former is more likely than the latter.
I agree; it pays to shop around!
I see a non-callable brokered CD at Fidelity for 3.2% for 5 years.
Also a 5 year treasury at 2.99%
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Re: CD discussion thread

Post by MikeG62 »

hudson wrote: Wed May 18, 2022 6:45 am
MikeG62 wrote: Wed May 18, 2022 6:38 am
hudson wrote: Wed May 18, 2022 6:23 am PENFED https://www.penfed.org/
2.75% APY* for 5 Years
2.25% APY* for 3 Years
1.75% APY* for 18 Months
Treasuries still seem to offer better value. For example, on Monday I bought (in the secondary market) a Treasury bill maturing in Dec 2022 at a yield of 1.50% and a Treasury bond maturing in May of 2023 at a yield of 2.12%.

I'm thinking either CD's rates will continue to creep up to become competitive with Treasuries or Treasury yields will decline. If I had to guess which one, I'd bet the former is more likely than the latter.
I agree; it pays to shop around!
I see a non-callable brokered CD at Fidelity for 3.2% for 5 years.
Also a 5 year treasury at 2.99%
True.
That one is better than the comparable term Treasury on the headline, but closer to inline with the 5-year Treasury once the state tax break is factored in.

It might be a good deal (as good as it gets), but I tend to think not. Of course, I could be wrong. Having said that, I am building a Treasury ladder with bonds maturing in 6 to as long as 12 months to present me with maturing bond proceeds to reinvest at what I think may well be better rates as we move forward. Maybe I'll regret having done that and wish I had just went all in at these rates.
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hudson
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Re: CD discussion thread

Post by hudson »

MikeG62 wrote: Wed May 18, 2022 7:05 am
hudson wrote: Wed May 18, 2022 6:45 am
MikeG62 wrote: Wed May 18, 2022 6:38 am
hudson wrote: Wed May 18, 2022 6:23 am PENFED https://www.penfed.org/
2.75% APY* for 5 Years
2.25% APY* for 3 Years
1.75% APY* for 18 Months
Treasuries still seem to offer better value. For example, on Monday I bought (in the secondary market) a Treasury bill maturing in Dec 2022 at a yield of 1.50% and a Treasury bond maturing in May of 2023 at a yield of 2.12%.

I'm thinking either CD's rates will continue to creep up to become competitive with Treasuries or Treasury yields will decline. If I had to guess which one, I'd bet the former is more likely than the latter.
I agree; it pays to shop around!
I see a non-callable brokered CD at Fidelity for 3.2% for 5 years.
Also a 5 year treasury at 2.99%
True.
That one is better than the comparable term Treasury on the headline, but closer to inline with the 5-year Treasury once the state tax break is factored in.

It might be a good deal (as good as it gets), but I tend to think not. Of course, I could be wrong. Having said that, I am building a Treasury ladder with bonds maturing in 6 to as long as 12 months to present me with maturing bond proceeds to reinvest at what I think may well be better rates as we move forward. Maybe I'll regret having done that and wish I had just went all in at these rates.
That's probably a good bet.
I get greedy looking at over-3%-interest over five or more years.
If I had a large pile to invest today, I'd go with five or more year maturities and maybe 70% individual TIPS and 30% nominal.
But I don't have a nickel to invest, so talk's cheap. :)
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jeffyscott
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Re: CD discussion thread

Post by jeffyscott »

hudson wrote: Wed May 18, 2022 6:45 am
MikeG62 wrote: Wed May 18, 2022 6:38 am
hudson wrote: Wed May 18, 2022 6:23 am PENFED https://www.penfed.org/
2.75% APY* for 5 Years
2.25% APY* for 3 Years
1.75% APY* for 18 Months
Treasuries still seem to offer better value. For example, on Monday I bought (in the secondary market) a Treasury bill maturing in Dec 2022 at a yield of 1.50% and a Treasury bond maturing in May of 2023 at a yield of 2.12%.

I'm thinking either CD's rates will continue to creep up to become competitive with Treasuries or Treasury yields will decline. If I had to guess which one, I'd bet the former is more likely than the latter.
I agree; it pays to shop around!
I see a non-callable brokered CD at Fidelity for 3.2% for 5 years.
Also a 5 year treasury at 2.99%
It currently only seems to be worth shopping around between brokered CDs and Treasuries, though. Which is fine by me, direct CDs are a hassle since all our money for them is in IRAs. I had resisted moving money to direct CDs, but finally could not resist doing some of that in the summer of 2020.

Treasury rates seem to be more volatile than brokered CD rates, the brokered CDs had kind of moved ahead at least at 2 years+ (this was at least in part due to some treasury yields declining), but then that gap closed quite a bit again yesterday (treasury yields went up a bit). I have been paying too much attention over the last month (in anticipation of money from a matured direct CD moving back to brokerage account) and for a while it was: I'll probably just buy treasuries, then it was certain to be CDs (at least for 2 years+). Then yesterday, when the money finally arrived, it was kind of a toss-up (CDs may be a bit higher but that's offset by less liquidity and state income tax).

I ended up buying a couple <1 year treasuries to potentially cover some known expenses and a 7 year TIPS with a portion of the money. I will deploy some more to either 2-4 year CDs or a short term bond index (if the CD treasury spread is too small I am just going to use the fund, which is about 70% treasuries) and another TIPS today.
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Re: CD discussion thread

Post by hudson »

jeffyscott wrote: Wed May 18, 2022 7:25 am I have been paying too much attention over the last month (in anticipation of money from a matured direct CD moving back to brokerage account)
It pays to pay attention to maturity dates.
It pays to pay too much attention to rates.
It pays not to forget taxes.
Bottom line: With the above, when that day comes, you're ready!

He or she who hesitates....
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turtlebug
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Re: CD discussion thread

Post by turtlebug »

Connexus Credit Union now offers the following CDs:

12-month CD (2.26% APY)
24-month CD (2.86% APY)
36-month CD (3.01% APY)
48-month CD (3.11% APY)
60-month CD (3.21% APY)

$5k minimum deposit, easy membership requirement.
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Kevin M
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Re: CD discussion thread

Post by Kevin M »

turtlebug wrote: Thu May 19, 2022 12:40 pm Connexus Credit Union now offers the following CDs:

12-month CD (2.26% APY)
24-month CD (2.86% APY)
36-month CD (3.01% APY)
48-month CD (3.11% APY)
60-month CD (3.21% APY)

$5k minimum deposit, easy membership requirement.
Those are good yields, but with the exception of the 1-year, I see higher yields for new issue brokered CDs at Fidelity, for example. The 1-year brokered is 2.15%, and I wouldn't mess around joining another credit union for an extra 11 basis points.

Thanks for sharing,

Kevin
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MikeG62
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Re: CD discussion thread

Post by MikeG62 »

Kevin M wrote: Thu May 19, 2022 1:27 pm
turtlebug wrote: Thu May 19, 2022 12:40 pm Connexus Credit Union now offers the following CDs:

12-month CD (2.26% APY)
24-month CD (2.86% APY)
36-month CD (3.01% APY)
48-month CD (3.11% APY)
60-month CD (3.21% APY)

$5k minimum deposit, easy membership requirement.
Those are good yields, but with the exception of the 1-year, I see higher yields for new issue brokered CDs at Fidelity, for example. The 1-year brokered is 2.15%, and I wouldn't mess around joining another credit union for an extra 11 basis points.

Thanks for sharing,

Kevin
I agree these are very competitive rates at the current time.

WRT the comparison to brokered CD's, I think I'd want a higher return vs. a traditional direct purchased CD due to the fact that brokered CD's cannot be terminated early. Not that I would buy one with that as the plan, but I'd like to know I can get out in the event (however unlikely it might be) that I needed to or it made sense to.
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Re: CD discussion thread

Post by tomd37 »

In reading the details I noticed that Connexus interest is calculated and applied quarterly.
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Kevin M
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Re: CD discussion thread

Post by Kevin M »

MikeG62 wrote: Thu May 19, 2022 1:36 pm
Kevin M wrote: Thu May 19, 2022 1:27 pm
turtlebug wrote: Thu May 19, 2022 12:40 pm Connexus Credit Union now offers the following CDs:

12-month CD (2.26% APY)
24-month CD (2.86% APY)
36-month CD (3.01% APY)
48-month CD (3.11% APY)
60-month CD (3.21% APY)

$5k minimum deposit, easy membership requirement.
Those are good yields, but with the exception of the 1-year, I see higher yields for new issue brokered CDs at Fidelity, for example. The 1-year brokered is 2.15%, and I wouldn't mess around joining another credit union for an extra 11 basis points.

Thanks for sharing,

Kevin
I agree these are very competitive rates at the current time.

WRT the comparison to brokered CD's, I think I'd want a higher return vs. a traditional direct purchased CD due to the fact that brokered CD's cannot be terminated early. Not that I would buy one with that as the plan, but I'd like to know I can get out in the event (however unlikely it might be) that I needed to or it made sense to.
Agreed, but only for the longer maturities, and only if the EWP is reasonable. Six months of interest is reasonable. For anything more than that, I'd really want to look at how much rates would have to increase for it to be valuable. I don't think the early withdrawal option has much value for say 1 or 2-year CDs, unless you really think there's a very good chance that yields are going to skyrocket.

As a current example, we weren't paying attention, and one of my wife's IRA CDs rolled over to an 18-month CD at 0.65% in April. With a Treasury maturing at about the same time I see ask yields of about 2.4%. I'm not sure what the EWP is, but even at 1 year of interest it makes sense to do an early withdrawal and transfer to a broker to buy a Treasury or brokered CD, since weu'd still net about 2% over one year, and more over the next six months.

At this point, I'm not going out further than 2 years for Treasuries. The 2-year new-issue rates shown at Fidelity now is 2.95% callable, and 2.9% non-callable. That's about 30 basis points higher than the 2-year Treasury yield of 2.61% shown at Fidelity, so if I were sure I wouldn't sell before maturity, I'd now favor the brokered 2-year CD over the Treasury.

Kevin
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MikeG62
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Re: CD discussion thread

Post by MikeG62 »

Kevin M wrote: Thu May 19, 2022 4:13 pm
MikeG62 wrote: Thu May 19, 2022 1:36 pm
Kevin M wrote: Thu May 19, 2022 1:27 pm
turtlebug wrote: Thu May 19, 2022 12:40 pm Connexus Credit Union now offers the following CDs:

12-month CD (2.26% APY)
24-month CD (2.86% APY)
36-month CD (3.01% APY)
48-month CD (3.11% APY)
60-month CD (3.21% APY)

$5k minimum deposit, easy membership requirement.
Those are good yields, but with the exception of the 1-year, I see higher yields for new issue brokered CDs at Fidelity, for example. The 1-year brokered is 2.15%, and I wouldn't mess around joining another credit union for an extra 11 basis points.

Thanks for sharing,

Kevin
I agree these are very competitive rates at the current time.

WRT the comparison to brokered CD's, I think I'd want a higher return vs. a traditional direct purchased CD due to the fact that brokered CD's cannot be terminated early. Not that I would buy one with that as the plan, but I'd like to know I can get out in the event (however unlikely it might be) that I needed to or it made sense to.
Agreed, but only for the longer maturities, and only if the EWP is reasonable. Six months of interest is reasonable. For anything more than that, I'd really want to look at how much rates would have to increase for it to be valuable. I don't think the early withdrawal option has much value for say 1 or 2-year CDs, unless you really think there's a very good chance that yields are going to skyrocket.

As a current example, we weren't paying attention, and one of my wife's IRA CDs rolled over to an 18-month CD at 0.65% in April. With a Treasury maturing at about the same time I see ask yields of about 2.4%. I'm not sure what the EWP is, but even at 1 year of interest it makes sense to do an early withdrawal and transfer to a broker to buy a Treasury or brokered CD, since weu'd still net about 2% over one year, and more over the next six months.

At this point, I'm not going out further than 2 years for Treasuries. The 2-year new-issue rates shown at Fidelity now is 2.95% callable, and 2.9% non-callable. That's about 30 basis points higher than the 2-year Treasury yield of 2.61% shown at Fidelity, so if I were sure I wouldn't sell before maturity, I'd now favor the brokered 2-year CD over the Treasury.

Kevin
Makes sense. I agree.
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Re: CD discussion thread

Post by jeffyscott »

Kevin M wrote: Thu May 19, 2022 4:13 pmAt this point, I'm not going out further than 2 years for Treasuries. The 2-year new-issue rates shown at Fidelity now is 2.95% callable, and 2.9% non-callable. That's about 30 basis points higher than the 2-year Treasury yield of 2.61% shown at Fidelity, so if I were sure I wouldn't sell before maturity, I'd now favor the brokered 2-year CD over the Treasury.
Kevin
I see the same 2 year rates on Schwab, the only 2.9% one doesn't settle until June 1, though.

Unlike the last time I was buying brokered CDs, about 3-4 years ago, there seem to be few secondaries that are worth buying. Previously those typically had a bit higher yield and had the added advantage of settling in 1 day. Not seeing much of that now.
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Re: CD discussion thread

Post by Kevin M »

jeffyscott wrote: Fri May 20, 2022 8:55 am
Kevin M wrote: Thu May 19, 2022 4:13 pmAt this point, I'm not going out further than 2 years for Treasuries. The 2-year new-issue rates shown at Fidelity now is 2.95% callable, and 2.9% non-callable. That's about 30 basis points higher than the 2-year Treasury yield of 2.61% shown at Fidelity, so if I were sure I wouldn't sell before maturity, I'd now favor the brokered 2-year CD over the Treasury.
Kevin
I see the same 2 year rates on Schwab, the only 2.9% one doesn't settle until June 1, though.

Unlike the last time I was buying brokered CDs, about 3-4 years ago, there seem to be few secondaries that are worth buying. Previously those typically had a bit higher yield and had the added advantage of settling in 1 day. Not seeing much of that now.
Thanks for that info.
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Re: CD discussion thread

Post by jeffyscott »

Reinvesting some funds from a direct CD this week in 2-4 year brokered CDs, I ended up getting 2.9-3.2%, three new issues and two existing. I estimate that I averaged about 0.29% above equivalent treasury rates (and maybe more like 0.25%, after including consideration of the delayed settlement on the new CDs), this would be pretty close to break-even after taxes. For the brokered CDs that I bought 3-4 years ago, my weighted average was about 0.4% above equivalent treasuries, essentially all were existing CDs at that time.

(Also averaged only about 0.08% above the Connexus rates that were posted above, which are the best direct CD rates that would be available to me, according to deposit accounts. But I prefer the brokered route for convenience.)
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Re: CD discussion thread

Post by Elmo »

Been considering brokered CDs following this thread but it seems like there are so many gotchas. Does anyone know of a resource to coach me through it. Reading long threads that have lots of good info but I wondered if there were some post somewhere to take me through it.

Thank you, I am just getting my feet wet with anything other than dired CDs and a bit of bond funds.
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Re: CD discussion thread

Post by Kevin M »

Elmo wrote: Fri May 20, 2022 3:22 pm Been considering brokered CDs following this thread but it seems like there are so many gotchas. Does anyone know of a resource to coach me through it. Reading long threads that have lots of good info but I wondered if there were some post somewhere to take me through it.

Thank you, I am just getting my feet wet with anything other than dired CDs and a bit of bond funds.
What gotchas?

The only thing I can think of is to make sure the CD is not callable unless you want to risk having it called before maturity if rates were to fall much.

At least if you're buying new issues, which I'd recommend if you're just getting started. For secondary market, you need to consider the $1 per $1,000 face value commission, which reduces your net yield a bit.
If I make a calculation error, #Cruncher probably will let me know.
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Re: CD discussion thread

Post by Blues »

I want to thank all of you mavens for finally getting me off my butt to move some money into Treasuries from CDs that have been coming due at Ally.

Of course, I had to quit my dinosaur ways and make the change over from the mutual fund to brokerage account at Vanguard. But I guess I held out as long as (or longer than) I needed to. (I'm a Luddite at heart. Simple is beautiful.)

Anyway... :sharebeer
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jeffyscott
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Re: CD discussion thread

Post by jeffyscott »

Kevin M wrote: Fri May 20, 2022 5:11 pm
Elmo wrote: Fri May 20, 2022 3:22 pm Been considering brokered CDs following this thread but it seems like there are so many gotchas. Does anyone know of a resource to coach me through it. Reading long threads that have lots of good info but I wondered if there were some post somewhere to take me through it.

Thank you, I am just getting my feet wet with anything other than dired CDs and a bit of bond funds.
What gotchas?

The only thing I can think of is to make sure the CD is not callable unless you want to risk having it called before maturity if rates were to fall much.

At least if you're buying new issues, which I'd recommend if you're just getting started. For secondary market, you need to consider the $1 per $1,000 face value commission, which reduces your net yield a bit.
Schwab actually presents the secondaries net of commission, with the downside being a $10 minimum. But at least what you see is what you get. I found it pretty easy to migrate from new issues to secondary there, because of that.

I don't know how useful they are but Vanguard, Fidelity, Schwab, and I'm sure others have pages about "how to buy CDs".

Schwab's has contact number or form for "fixed income specialist": https://www.schwab.com/fixed-income/cer ... es-deposit
Fidelity probably has something similar. Vanguard maybe not so much, unless you have $5 million or something like that :mrgreen: .
https://www.schwab.com/fixed-income/cer ... es-deposit
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Re: CD discussion thread

Post by Elmo »

jeffyscott wrote: Fri May 20, 2022 6:10 pm
Kevin M wrote: Fri May 20, 2022 5:11 pm
Elmo wrote: Fri May 20, 2022 3:22 pm Been considering brokered CDs following this thread but it seems like there are so many gotchas. Does anyone know of a resource to coach me through it. Reading long threads that have lots of good info but I wondered if there were some post somewhere to take me through it.

Thank you, I am just getting my feet wet with anything other than dired CDs and a bit of bond funds.
What gotchas?

The only thing I can think of is to make sure the CD is not callable unless you want to risk having it called before maturity if rates were to fall much.

At least if you're buying new issues, which I'd recommend if you're just getting started. For secondary market, you need to consider the $1 per $1,000 face value commission, which reduces your net yield a bit.
Schwab actually presents the secondaries net of commission, with the downside being a $10 minimum. But at least what you see is what you get. I found it pretty easy to migrate from new issues to secondary there, because of that.

I don't know how useful they are but Vanguard, Fidelity, Schwab, and I'm sure others have pages about "how to buy CDs".

Schwab's has contact number or form for "fixed income specialist": https://www.schwab.com/fixed-income/cer ... es-deposit
Fidelity probably has something similar. Vanguard maybe not so much, unless you have $5 million or something like that :mrgreen: .
https://www.schwab.com/fixed-income/cer ... es-deposit
Thank you for your responses. I will keep that in mind and look at those links.
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Re: CD discussion thread

Post by Blues »

Hey guys, I hadn't thought about this earlier, but does anyone know, offhand, if there is a limit for electronic transfers from a bank like Ally to Vanguard in a given day, or time period?

Thanks in advance.
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jeffyscott
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Re: CD discussion thread

Post by jeffyscott »

Elmo wrote: Sat May 21, 2022 4:23 pm
jeffyscott wrote: Fri May 20, 2022 6:10 pm
Kevin M wrote: Fri May 20, 2022 5:11 pm
Elmo wrote: Fri May 20, 2022 3:22 pm Been considering brokered CDs following this thread but it seems like there are so many gotchas. Does anyone know of a resource to coach me through it. Reading long threads that have lots of good info but I wondered if there were some post somewhere to take me through it.

Thank you, I am just getting my feet wet with anything other than dired CDs and a bit of bond funds.
What gotchas?

The only thing I can think of is to make sure the CD is not callable unless you want to risk having it called before maturity if rates were to fall much.

At least if you're buying new issues, which I'd recommend if you're just getting started. For secondary market, you need to consider the $1 per $1,000 face value commission, which reduces your net yield a bit.
Schwab actually presents the secondaries net of commission, with the downside being a $10 minimum. But at least what you see is what you get. I found it pretty easy to migrate from new issues to secondary there, because of that.

I don't know how useful they are but Vanguard, Fidelity, Schwab, and I'm sure others have pages about "how to buy CDs".

Schwab's has contact number or form for "fixed income specialist": https://www.schwab.com/fixed-income/cer ... es-deposit
Fidelity probably has something similar. Vanguard maybe not so much, unless you have $5 million or something like that :mrgreen: .
https://www.schwab.com/fixed-income/cer ... es-deposit
Thank you for your responses. I will keep that in mind and look at those links.
If you want to, another thing you can do would be to post here asking for opinions on a specific CD that you are considering, before going through with it.
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Re: CD discussion thread

Post by Kevin M »

Blues wrote: Sat May 21, 2022 4:25 pm Hey guys, I hadn't thought about this earlier, but does anyone know, offhand, if there is a limit for electronic transfers from a bank like Ally to Vanguard in a given day, or time period?

Thanks in advance.
So we'll assume you are talking about transferring money to buy CDs at Vanguard, so the question is on topic.

All banks and credit unions I've used have a limit for outbound ACH transfers. Ally's limits are quite high. But, since Vanguard is not a bank, you normally would initiate the transfer at Vanguard. The Ally outbound limits do not apply in this case, since Vanguard is taking the risk that something goes wrong with the ACH. Vanguard protects itself by not letting you withdraw money transferred in for about 10 days.

For example, my outbound daily limit at Ally is $150K, but I recently bought $350K of Vanguard CA muni MM fund (initiated at Vanguard, of course), with the cash coming from Ally. No problemo.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
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Blues
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Re: CD discussion thread

Post by Blues »

Thanks, Kevin.

I initiated a low six figure transfer from Ally yesterday to Vanguard after I made the change over to the brokerage account from the "mutual fund only" account. (Our IRAs had already been converted some years back.) Just wanted to make sure I hadn't overlooked something in doing so, though no red flags were raised when I placed the two orders...
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Re: CD discussion thread

Post by scguy613 »

I buy CD’s through Fidelity’s brokered CD program. Current rates:

1 year: 2.15
2year: 2.85
3 year: 3.10
5 year: 3.30

I’m sticking to 6 month and one year CD’s for now since rates are rising. All CD’s are with banks and FDIC insured and I like being able to see them on my Fidelity statement. I may be able to get slightly more by shopping around, but the slight difference isn’t worth the time to me. The banks are quoting callable and non callable rates, with non callable approximately 0.05 less.

I will probably buy more if rates rise after the Fed meeting in June, but still 6 month and one year until the Fed signals they are close to through, then go longer term.
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Re: CD discussion thread

Post by Kevin M »

scguy613 wrote: Sat May 21, 2022 6:16 pm I buy CD’s through Fidelity’s brokered CD program. Current rates:

1 year: 2.15
2year: 2.85
3 year: 3.10
5 year: 3.30

I’m sticking to 6 month and one year CD’s for now since rates are rising. All CD’s are with banks and FDIC insured and I like being able to see them on my Fidelity statement. I may be able to get slightly more by shopping around, but the slight difference isn’t worth the time to me. The banks are quoting callable and non callable rates, with non callable approximately 0.05 less.

I will probably buy more if rates rise after the Fed meeting in June, but still 6 month and one year until the Fed signals they are close to through, then go longer term.
Treasuries appear to have slightly higher yields than brokered CDs out to 9-month maturity, and 1-year is pretty much a wash.

Image

I would go with Treasuries unless the CD offered say 10 basis points more, since Treasuries are much more liquid. I see no reason to go with a CD if the Treasury yield is higher for the same maturity.

I have been going out to 2-year maturity for nominal Treasuries, and at Fidelity Yields page I see 2-year CD at 2.85% (non callable) and 2-year Treasury at 2.59%, so in this case the CD has enough of a yield advantage to be worth it to me (26 basis points), since I would hold to maturity (so liquidity doesn't matter).

Last 2y Treasury I bought was on 4/25/2022 with a yield of 2.72%. I would like to see something about 20 basis points higher than that before buying more 2-year, so say 2.92% or more.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
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Re: CD discussion thread

Post by jeffyscott »

Kevin M wrote: Sat May 21, 2022 9:13 pm
scguy613 wrote: Sat May 21, 2022 6:16 pm I buy CD’s through Fidelity’s brokered CD program. Current rates:

1 year: 2.15
2year: 2.85
3 year: 3.10
5 year: 3.30

I’m sticking to 6 month and one year CD’s for now since rates are rising. All CD’s are with banks and FDIC insured and I like being able to see them on my Fidelity statement. I may be able to get slightly more by shopping around, but the slight difference isn’t worth the time to me. The banks are quoting callable and non callable rates, with non callable approximately 0.05 less.

I will probably buy more if rates rise after the Fed meeting in June, but still 6 month and one year until the Fed signals they are close to through, then go longer term.
Treasuries appear to have slightly higher yields than brokered CDs out to 9-month maturity, and 1-year is pretty much a wash.

Image

I would go with Treasuries unless the CD offered say 10 basis points more, since Treasuries are much more liquid. I see no reason to go with a CD if the Treasury yield is higher for the same maturity.

I have been going out to 2-year maturity for nominal Treasuries, and at Fidelity Yields page I see 2-year CD at 2.85% (non callable) and 2-year Treasury at 2.59%, so in this case the CD has enough of a yield advantage to be worth it to me (26 basis points), since I would hold to maturity (so liquidity doesn't matter).

Last 2y Treasury I bought was on 4/25/2022 with a yield of 2.72%. I would like to see something about 20 basis points higher than that before buying more 2-year, so say 2.92% or more.

Kevin
Yes, I took a 9 month Treasury at about 1.93% last week, CDs were not competitive for that term.

I was not looking for anything between 9 months and about 2 years and at 2 years, I got 2.9% on a CD and a similar term treasury would have been about 2.62% at the time. I'd have taken the 2 year treasury over the CD in a taxable account, since they'd be nearly the same after accounting for state income taxes.

I don't plan to sell any of the CDs or treasuries, but if something unexpected came up, the < 1 year treasuries do have the added advantage of being easy to sell at little cost.
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Re: CD discussion thread

Post by Kevin M »

:thumbsup Jeffyscott.
If I make a calculation error, #Cruncher probably will let me know.
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indexfundfan
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Re: CD discussion thread

Post by indexfundfan »

Kevin M wrote: Sat May 21, 2022 9:13 pm Image
Just thought I would like to mention one additional short-term cash investment alternative here using SPX box spread option trades.

The most current recent trades (see Boxtrades.com) shows the following

4-mo (matures 9/16/22) 1.8%
7-mo (matures 12/16/22) 2.2%
13-mo (matures 6/16/23) 2.8%
19-mo (matures 12/15/23) 3.0%

Instead of earning "interest" which are taxable at your income tax rates, the return using box spreads is a combination of 60% LTCG and 40% STCG. If you have harvested capital losses to offset the gain, then you won't be paying any tax.
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MikeG62
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Re: CD discussion thread

Post by MikeG62 »

indexfundfan wrote: Sun May 22, 2022 7:19 am
Kevin M wrote: Sat May 21, 2022 9:13 pm Image
Just thought I would like to mention one additional short-term cash investment alternative here using SPX box spread option trades.

The most current recent trades (see Boxtrades.com) shows the following

4-mo (matures 9/16/22) 1.8%
7-mo (matures 12/16/22) 2.2%
13-mo (matures 6/16/23) 2.8%
19-mo (matures 12/15/23) 3.0%

Instead of earning "interest" which are taxable at your income tax rates, the return using box spreads is a combination of 60% LTCG and 40% STCG. If you have harvested capital losses to offset the gain, then you won't be paying any tax.
Interesting. I am up for a little education here. Can you tell us how this works exactly?

I went to the Boxtrades.com and it looks like you need to purchase four option contracts (two calls and two puts).

1) Are there not fees in doing so (or are they reflected in the figures shown)? It would only take very minor changes in the cost of any one of these option contracts to materially alter the return assumptions (such as it seems could happen with normal shifts in the market while placing the trades four trades). Or are they somehow placed as a single trade?

2) What do you need to do, if anything, when the option contracts reach expiration?
Real Knowledge Comes Only From Experience
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jeffyscott
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Re: CD discussion thread

Post by jeffyscott »

MikeG62 wrote: Sun May 22, 2022 7:42 am
indexfundfan wrote: Sun May 22, 2022 7:19 am
Kevin M wrote: Sat May 21, 2022 9:13 pm Image
Just thought I would like to mention one additional short-term cash investment alternative here using SPX box spread option trades.

The most current recent trades (see Boxtrades.com) shows the following

4-mo (matures 9/16/22) 1.8%
7-mo (matures 12/16/22) 2.2%
13-mo (matures 6/16/23) 2.8%
19-mo (matures 12/15/23) 3.0%

Instead of earning "interest" which are taxable at your income tax rates, the return using box spreads is a combination of 60% LTCG and 40% STCG. If you have harvested capital losses to offset the gain, then you won't be paying any tax.
Interesting. I am up for a little education here. Can you tell us how this works exactly?

I went to the Boxtrades.com and it looks like you need to purchase four option contracts (two calls and two puts).

1) Are there not fees in doing so (or are they reflected in the figures shown)? It would only take very minor changes in the cost of any one of these option contracts to materially alter the return assumptions (such as it seems could happen with normal shifts in the market while placing the trades four trades). Or are they somehow placed as a single trade?

2) What do you need to do, if anything, when the option contracts reach expiration?
I have never read any of it, but periodically see a long discussion appear in the current list:
viewtopic.php?t=344667

When searching for that one, this shorter one also turned up: viewtopic.php?t=371120
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indexfundfan
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Re: CD discussion thread

Post by indexfundfan »

MikeG62 wrote: Sun May 22, 2022 7:42 am
indexfundfan wrote: Sun May 22, 2022 7:19 am
Kevin M wrote: Sat May 21, 2022 9:13 pm Image
Just thought I would like to mention one additional short-term cash investment alternative here using SPX box spread option trades.

The most current recent trades (see Boxtrades.com) shows the following

4-mo (matures 9/16/22) 1.8%
7-mo (matures 12/16/22) 2.2%
13-mo (matures 6/16/23) 2.8%
19-mo (matures 12/15/23) 3.0%

Instead of earning "interest" which are taxable at your income tax rates, the return using box spreads is a combination of 60% LTCG and 40% STCG. If you have harvested capital losses to offset the gain, then you won't be paying any tax.
Interesting. I am up for a little education here. Can you tell us how this works exactly?

I went to the Boxtrades.com and it looks like you need to purchase four option contracts (two calls and two puts).

1) Are there not fees in doing so (or are they reflected in the figures shown)? It would only take very minor changes in the cost of any one of these option contracts to materially alter the return assumptions (such as it seems could happen with normal shifts in the market while placing the trades four trades). Or are they somehow placed as a single trade?

2) What do you need to do, if anything, when the option contracts reach expiration?
MikeG62, I replied in the following thread:

viewtopic.php?p=6689597#p6689597
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turtlebug
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Re: CD discussion thread

Post by turtlebug »

USALLIANCE Financial Certificate Specials –

24-month (3.00% APY)
36-month (3.25% APY)

$500 minimum deposit. Easy membership requirement.
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Kevin M
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Re: CD discussion thread

Post by Kevin M »

turtlebug wrote: Fri May 27, 2022 12:21 pm USALLIANCE Financial Certificate Specials –

24-month (3.00% APY)
36-month (3.25% APY)

$500 minimum deposit. Easy membership requirement.
Darn, that's a good 2-year rate, and we recently initiated an IRA transfer out of there for my wife's IRA.
If I make a calculation error, #Cruncher probably will let me know.
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Blues
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Re: CD discussion thread

Post by Blues »

Kevin M wrote: Fri May 27, 2022 1:22 pm
turtlebug wrote: Fri May 27, 2022 12:21 pm USALLIANCE Financial Certificate Specials –

24-month (3.00% APY)
36-month (3.25% APY)

$500 minimum deposit. Easy membership requirement.
Darn, that's a good 2-year rate, and we recently initiated an IRA transfer out of there for my wife's IRA.
No good deed goes unpunished. It's the law. :happy
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Re: CD discussion thread

Post by hudson »

turtlebug wrote: Fri May 27, 2022 12:21 pm USALLIANCE Financial Certificate Specials –

24-month (3.00% APY)
36-month (3.25% APY)

$500 minimum deposit. Easy membership requirement.
NCUA #17857
Rye NY
Started as IBM employees
#160 by assets of all NCUA credit unions
5 year CDs..... .8%
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Re: CD discussion thread

Post by indexfundfan »

According to DepositAccounts, the US Alliance CDs have the following two caveats

1. The ability to withdraw any of the principal before maturity is not necessarily guaranteed.

2. The Credit Union has the right to call or redeem Certificate Accounts early. While that may sound a bit worrying, USALLIANCE states that option has never been exercised.

https://www.depositaccounts.com/banks/u ... al/offers/

Just be aware when signing up for their CDs.
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hudson
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Re: CD discussion thread

Post by hudson »

Thanks indexfundfan!
Most useful information!
Good eye!
KK2020
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Re: CD discussion thread

Post by KK2020 »

My wife & I have a couple of IRA CD"s' in our local credit union expiring in July & want to buy a T-Bill through Vanguard

I have read & saved the link from the finance buff on how to buy direct but am unsure on the procedure to do so

Would appreciate any information- Thanks !
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jeffyscott
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Re: CD discussion thread

Post by jeffyscott »

KK2020, this might help:

viewtopic.php?p=6719923#p6719923
evelynmanley
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Re: CD discussion thread

Post by evelynmanley »

KK2020 wrote: Fri Jun 10, 2022 3:04 pm My wife & I have a couple of IRA CD"s' in our local credit union expiring in July & want to buy a T-Bill through Vanguard

I have read & saved the link from the finance buff on how to buy direct but am unsure on the procedure to do so

Would appreciate any information- Thanks !
I posted the same question on 5/6/22, and lots of Bogleheads walked me through the process step-by-step, especially Kevin M:

viewtopic.php?p=6662541#p6662541

Kevin posted another walk-through today. Scroll down to today's date:

viewtopic.php?p=6720014#p6720014
KK2020
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Re: CD discussion thread

Post by KK2020 »

Thank you all for the links! :happy
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Re: CD discussion thread

Post by logiclife »

Iam trying to catch up with all the education (treasuries and brokered CD;s are new to me) here

we have ~75K lying the checking account for more than a year and looking to invest them in some near-short term (1-3 yrs).
On vanguard I came across this
******
10 - 12 months
Purchasing CD from:
Goldman Sachs Bank Usa 2.65% Matures 6/29/2023
Payment frequency: Interest at maturity Settles 6/29/2022
*******
and other options that pay 3% interest (not callable) fo2 2 yrs CD, but then if the brokered CD rates are going to fluctuate, would bank CD's are better even if they are lower? What am I missing? Any other suggestions for ~3 year investments for cash? Thanks so much.
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