Timing the CD Market

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Topic Author
anonenigma
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Timing the CD Market

Post by anonenigma »

I have CDs paying 0.55%-0.65%. One comes due in late August, the others in December. Current 1-1.5 year CDs at the same banks can yield up to 2.0%, so it's getting to be time to break the ones due in December.

Federal Reserve Chair Powell has suggested that there may be another increase (as much as 0.75%) in the Federal Funds Rate at the next meeting (late July).

My question is how long it takes after such an announcement for it to impact CD rates. A month? Longer?
nalor511
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Re: Timing the CD Market

Post by nalor511 »

You can buy ibonds earning much more (over 8%)
MrJedi
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Re: Timing the CD Market

Post by MrJedi »

Treasuries paying much better too.
Geologist
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Re: Timing the CD Market

Post by Geologist »

Banks (or credit unions) can change CD interest rate when it suits them (based on general interest rates and their own internal needs). Each individual institution will raise rates when it suits and there is no way to predict it.
RCL
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Re: Timing the CD Market

Post by RCL »

nalor511 wrote: Sat Jun 25, 2022 1:43 pm You can buy ibonds earning much more (over 8%)
That's not what he asked :wink:
Please don't turn another Cd thread into an I bonds thread.
MrJedi wrote: Sat Jun 25, 2022 1:46 pm Treasuries paying much better too.
nalor511
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Re: Timing the CD Market

Post by nalor511 »

RCL wrote: Sat Jun 25, 2022 2:02 pm
nalor511 wrote: Sat Jun 25, 2022 1:43 pm You can buy ibonds earning much more (over 8%)
That's not what he asked :wink:
Please don't turn another Cd thread into an I bonds thread.
MrJedi wrote: Sat Jun 25, 2022 1:46 pm Treasuries paying much better too.
A lot of people have "CD tunnel vision" in an (the current) environment where they may not be the best choice
Topic Author
anonenigma
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Re: Timing the CD Market

Post by anonenigma »

nalor511 wrote: Sat Jun 25, 2022 2:15 pm
RCL wrote: Sat Jun 25, 2022 2:02 pm
nalor511 wrote: Sat Jun 25, 2022 1:43 pm You can buy ibonds earning much more (over 8%)
That's not what he asked :wink:
Please don't turn another Cd thread into an I bonds thread.
MrJedi wrote: Sat Jun 25, 2022 1:46 pm Treasuries paying much better too.
A lot of people have "CD tunnel vision" in an (the current) environment where they may not be the best choice
The annual limit on ibond purchases is disqualifying.
Atgard
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Re: Timing the CD Market

Post by Atgard »

To try to respond directly to OP, I note that CD rates don't immediately track fed funds rate increases as quickly as Treasuries tend to. For brokered CDs, some seem to track relatively quickly (weeks to a month?), but for direct issue CDs there are still many banks offering 1% and other paltry rates, so that is a total crapshoot. So it definitely takes shopping around (whether via brokered CDs or looking at many direct issuers) to find good CD rates.
nalor511
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Re: Timing the CD Market

Post by nalor511 »

anonenigma wrote: Sat Jun 25, 2022 2:26 pm
nalor511 wrote: Sat Jun 25, 2022 2:15 pm
RCL wrote: Sat Jun 25, 2022 2:02 pm
nalor511 wrote: Sat Jun 25, 2022 1:43 pm You can buy ibonds earning much more (over 8%)
That's not what he asked :wink:
Please don't turn another Cd thread into an I bonds thread.
MrJedi wrote: Sat Jun 25, 2022 1:46 pm Treasuries paying much better too.
A lot of people have "CD tunnel vision" in an (the current) environment where they may not be the best choice
The annual limit on ibond purchases is disqualifying.
Maybe, maybe not. You can exceed it with sole prop, multiple living trusts
Topic Author
anonenigma
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Re: Timing the CD Market

Post by anonenigma »

nalor511 wrote: Sat Jun 25, 2022 3:23 pm
anonenigma wrote: Sat Jun 25, 2022 2:26 pm
nalor511 wrote: Sat Jun 25, 2022 2:15 pm
RCL wrote: Sat Jun 25, 2022 2:02 pm
nalor511 wrote: Sat Jun 25, 2022 1:43 pm You can buy ibonds earning much more (over 8%)
That's not what he asked :wink:
Please don't turn another Cd thread into an I bonds thread.
MrJedi wrote: Sat Jun 25, 2022 1:46 pm Treasuries paying much better too.
A lot of people have "CD tunnel vision" in an (the current) environment where they may not be the best choice
The annual limit on ibond purchases is disqualifying.
Maybe, maybe not. You can exceed it with sole prop, multiple living trusts
Way too complicated.
nalor511
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Re: Timing the CD Market

Post by nalor511 »

anonenigma wrote: Sat Jun 25, 2022 5:23 pm
nalor511 wrote: Sat Jun 25, 2022 3:23 pm
anonenigma wrote: Sat Jun 25, 2022 2:26 pm
nalor511 wrote: Sat Jun 25, 2022 2:15 pm
RCL wrote: Sat Jun 25, 2022 2:02 pm

That's not what he asked :wink:
Please don't turn another Cd thread into an I bonds thread.
A lot of people have "CD tunnel vision" in an (the current) environment where they may not be the best choice
The annual limit on ibond purchases is disqualifying.
Maybe, maybe not. You can exceed it with sole prop, multiple living trusts
Way too complicated.
Your choice.
$100k * 2.0% = $2,000
$100k * 8.0% = $8,000

I chose to go through a few hoops for 8%+. I didn't *want* to go through those hoops, but the return is hard to beat
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like2read
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Re: Timing the CD Market

Post by like2read »

+1 on tough to predict. Each bank and their needs vary.

Recommend considering Treasuries too.

You might want to bookmark the following for getting a sense of competing options:

https://fixedincome.fidelity.com/ftgw/fi/FILanding

l2r
MikeG62
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Re: Timing the CD Market

Post by MikeG62 »

anonenigma wrote: Sat Jun 25, 2022 5:23 pm
nalor511 wrote: Sat Jun 25, 2022 3:23 pm
anonenigma wrote: Sat Jun 25, 2022 2:26 pm
nalor511 wrote: Sat Jun 25, 2022 2:15 pm
RCL wrote: Sat Jun 25, 2022 2:02 pm

That's not what he asked :wink:
Please don't turn another Cd thread into an I bonds thread.
A lot of people have "CD tunnel vision" in an (the current) environment where they may not be the best choice
The annual limit on ibond purchases is disqualifying.
Maybe, maybe not. You can exceed it with sole prop, multiple living trusts
Way too complicated.
I agree with that.

However, you can frontload purchases using gift box purchases. My wife and I purchased $10,000 each in April, then we purchased $20,000 each into our gift boxes (mine for her and hers for me) with deliveries expected for those in 2023 and 2024. We may front load 2025 purchases depending on what the next rate adjustment looks like (we will make that call in Oct to lock in the current 9.62% rate for Oct '22 - Mar of '23 and then the Nov 1 rate reset for April of '23 through Sept of '23. It's still small dollars, but hard to turn down given how easy it is to set up the account and make the purchases.

WRT your initial question about breaking any of your existing CD's, depends on the EWP and the rate spread on replacement CD's. I broke several two weeks ago to purchase Treasury bonds, but not the ones maturing in the next several months as the economics weren't there on those.
Real Knowledge Comes Only From Experience
Topic Author
anonenigma
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Re: Timing the CD Market

Post by anonenigma »

MikeG62 wrote: Sun Jun 26, 2022 9:55 am
anonenigma wrote: Sat Jun 25, 2022 5:23 pm
nalor511 wrote: Sat Jun 25, 2022 3:23 pm
anonenigma wrote: Sat Jun 25, 2022 2:26 pm
nalor511 wrote: Sat Jun 25, 2022 2:15 pm

A lot of people have "CD tunnel vision" in an (the current) environment where they may not be the best choice
The annual limit on ibond purchases is disqualifying.
Maybe, maybe not. You can exceed it with sole prop, multiple living trusts
Way too complicated.
I agree with that.

However, you can frontload purchases using gift box purchases. My wife and I purchased $10,000 each in April, then we purchased $20,000 each into our gift boxes (mine for her and hers for me) with deliveries expected for those in 2023 and 2024. We may front load 2025 purchases depending on what the next rate adjustment looks like (we will make that call in Oct to lock in the current 9.62% rate for Oct '22 - Mar of '23 and then the Nov 1 rate reset for April of '23 through Sept of '23. It's still small dollars, but hard to turn down given how easy it is to set up the account and make the purchases.

WRT your initial question about breaking any of your existing CD's, depends on the EWP and the rate spread on replacement CD's. I broke several two weeks ago to purchase Treasury bonds, but not the ones maturing in the next several months as the economics weren't there on those.
Penalties will be 60 or 90 days at 0.55% and 0.65%. By August, I might be able to replace them with 2-2.5%.
Topic Author
anonenigma
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Re: Timing the CD Market

Post by anonenigma »

Update: Marcus Bank sent an e-mail that its savings account is now paying 1.2%, so I broke the 12 month 0.55% CD that would have matured in late December. It cost 90 days of interest, but I'll make that up in under 3 months. I'll stay in the savings account until I see whether the Fed raises the Fed Funds Rate late this month and then how CD rates are impacted.
SpaceCowboy
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Re: Timing the CD Market

Post by SpaceCowboy »

I subscribe to Deposit Accounts email feed to keep track of CD rates. Don’t see the point of buying <1% CDs.
Have been using MYGAs instead during the last couple of years. Best IMHO right now is 4.4% for 3 years. EWP are much higher than CDs.
Treasuries seem best right now for 1 year or shorter.
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Kevin M
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Re: Timing the CD Market

Post by Kevin M »

For December, you're looking at about 6 months, depending on when in December. So for a break calculation, use 5-month or 6-month CD or Treasury.

6-month brokered CD at Fidelity is 2.2%, and 6-month Treasury is 2.44%. Breaking a 0.65% CD to reinvest at 2.4% for six months is a no brainer.

I already have the IRA transfer form filled out to transfer proceeds from early withdrawals of Ally CDs maturing in August and December to Fidelity. I might lose a little on breaking the August one, but it's small, and I just want to get it out of Ally and somewhere I can earn more.

Six month and 1-year rates are less affected by Fed rate increases than 1-month and 3-month, which are closely tied to it. I think the anticipated Fed increases are already baked into the yields we're seeing.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
2020 ButClassic
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Re: Timing the CD Market

Post by 2020 ButClassic »

anonenigma wrote: Fri Jul 01, 2022 5:01 pm Update: Marcus Bank sent an e-mail that its savings account is now paying 1.2%, so I broke the 12 month 0.55% CD that would have matured in late December. It cost 90 days of interest, but I'll make that up in under 3 months. I'll stay in the savings account until I see whether the Fed raises the Fed Funds Rate late this month and then how CD rates are impacted.
How is the early withdrawal penalty treated for tax purposes? Will the amount be subtracted from the earned interest? Or is it just a complete loss, i.e., a non- recoverable penalty?
BarbK
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Re: Timing the CD Market

Post by BarbK »

2020 ButClassic wrote: Sat Jul 02, 2022 1:43 am
anonenigma wrote: Fri Jul 01, 2022 5:01 pm Update: Marcus Bank sent an e-mail that its savings account is now paying 1.2%, so I broke the 12 month 0.55% CD that would have matured in late December. It cost 90 days of interest, but I'll make that up in under 3 months. I'll stay in the savings account until I see whether the Fed raises the Fed Funds Rate late this month and then how CD rates are impacted.
How is the early withdrawal penalty treated for tax purposes? Will the amount be subtracted from the earned interest? Or is it just a complete loss, i.e., a non- recoverable penalty?
It is not a complete loss. It is subtracted from the earned interest.
RetiredCSProf
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Re: Timing the CD Market

Post by RetiredCSProf »

My local credit union is offering a 21-month CD at 3.25% dividend rate with a minimum investment of $10K. Offer is good through 31 July. I'm wondering whether to jump on this. I have $10K in a savings account there, earning 0.05% dividends.
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JIMX7
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Re: Timing the CD Market

Post by JIMX7 »

RetiredCSProf wrote: Sat Jul 02, 2022 7:06 pm My local credit union is offering a 21-month CD at 3.25% dividend rate with a minimum investment of $10K. Offer is good through 31 July. I'm wondering whether to jump on this. I have $10K in a savings account there, earning 0.05% dividends.
The 1 yr T Bill is over 3. Who knows what can happen In two years and get yourself a better saving account most are at 1 or higher.
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Chip Munk
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Re: Timing the CD Market

Post by Chip Munk »

JIMX7 wrote: Sat Jul 02, 2022 7:23 pm
RetiredCSProf wrote: Sat Jul 02, 2022 7:06 pm My local credit union is offering a 21-month CD at 3.25% dividend rate with a minimum investment of $10K. Offer is good through 31 July. I'm wondering whether to jump on this. I have $10K in a savings account there, earning 0.05% dividends.
The 1 yr T Bill is over 3. Who knows what can happen In two years and get yourself a better saving account most are at 1 or higher.
The 1-year T Bill rate has dropped quite a bit since it's high on 6/14/22. Last time I checked, the rate on the 1-yr T Bill was around 2.8% and the only Treasuries paying over 3% were the 20 year and 30 year: https://fixedincome.fidelity.com/ftgw/fi/FILanding https://home.treasury.gov/resource-cent ... value=2022

RetiredCSProf: A 3.25% dividend rate for a 21-month CD looks pretty competitive at the moment. I was looking at multiple listings for 2-year brokered CDs at 3.30% on Fidelity's website the day before yesterday and as of this morning they are all gone. Just now I took a look at Ally bank, Capital One and a credit union where I have an account that often has some good CD offers and none of them offered anything close to the offer you are looking at, even in a 5-year CD.
cubs1999
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Re: Timing the CD Market

Post by cubs1999 »

Chip Munk wrote: Sat Jul 02, 2022 8:11 pm
JIMX7 wrote: Sat Jul 02, 2022 7:23 pm
RetiredCSProf wrote: Sat Jul 02, 2022 7:06 pm My local credit union is offering a 21-month CD at 3.25% dividend rate with a minimum investment of $10K. Offer is good through 31 July. I'm wondering whether to jump on this. I have $10K in a savings account there, earning 0.05% dividends.
The 1 yr T Bill is over 3. Who knows what can happen In two years and get yourself a better saving account most are at 1 or higher.
The 1-year T Bill rate has dropped quite a bit since it's high on 6/14/22. Last time I checked, the rate on the 1-yr T Bill was around 2.8% and the only Treasuries paying over 3% were the 20 year and 30 year: https://fixedincome.fidelity.com/ftgw/fi/FILanding https://home.treasury.gov/resource-cent ... value=2022

RetiredCSProf: A 3.25% dividend rate for a 21-month CD looks pretty competitive at the moment. I was looking at multiple listings for 2-year brokered CDs at 3.30% on Fidelity's website the day before yesterday and as of this morning they are all gone. Just now I took a look at Ally bank, Capital One and a credit union where I have an account that often has some good CD offers and none of them offered anything close to the offer you are looking at, even in a 5-year CD.
The 3.3% two year cds sold out overnight. Now there's only a 3.25 callable form Ally, and a 3.15 not callable that's almost gone and 2.75 after that.
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