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Took me a while to figure out that Treasury Auction orders at Vanguard are shown right away only in the special area Trade Bonds & CDs order entry area, and NOT in the regular Order Status screen (they were shown after an overnight update). As there was no other indication (email, text) whether the order even registered, I found this confusing (but I know now). This in spite of a generic warning posted,
"Vanguard reserves the right to review any order submitted electronically and to subsequently approve or reject the order in accordance with Vanguard's trading policies. As a result of this review process, it's possible that the order's execution will be delayed or rejected. To monitor the status of an existing order, check the "Order Status" page."
The Order Status at Fido & Schwab are integrated and ALL orders are shown there - stocks/ETFs/CEFs, bonds, Treasury Secondary, Treasury Auction.
FYI I put in order for new issue Muni at Schwab. Only option for order was "day only" although auction closed two or three days later.
Next day order listed as "open" but "day only" although it was a day later.
Didn't close for three days.
It would not make any difference f Schwab had "Sweep" money markets but they don't, so for order to fill had to make sure you kept cash for order in account although oder status listed as "day only
I called them and went around and around. They admitted it was confusing and their bad but would not commit to easy fix
Just pick up some 2yr CD with Morgan Stanley yielding 4.7%. CDs will likely get over 5% after Nov and Dec rate hike. If CPI stays above the historical average of 3.5%, stock and bond return will struggle, 2-3% total?
... (he) Doesn't like the way that the world works. Well, neither do I, but what point in whining about it
Agree @Old_Joe, the ranting does get a little tiring. What do we want to go back to, looking at the daily news paper for stock results, dialing up a broker on a rotary phone and asking him to place the order for us and having him charge a hefty fee to do it? One can whine, but investing today is sooooo much simpler now than in the past with many, many more choices and options - and for a much smaller fee.
Agree. Time better spend to find pockets of opportunities in this challenging environment. Can’t imagine going back to using brokers for buy and sell orders.
I am loving the higher CD rates--just bought a 6 month CD at 4% and a 9 month CD at 4.25%. I have several other CDs maturing at the end of this calendar year and in the early part of 2023. Owning CDs have allowed me to have a positive Total Return YTD. I am retired, in mid 70s, and I focus on shorter term CDs, which pay a monthly yield, and the predictable yield allows me alot of opportunities for what I want to do with the investments. As far as what I expect in the future, I fully expect another .75% rate increase in November, and possibly another .75% rate increase in December. For 2023, I still expect rate increases, but smaller and less frequently. I fully expect to get 1 year and longer CDs, with interest payments at 5% or more by the end of this calendar year, and I think they will go up closer to 6% in 2023. Since my retirement total return objectives have been 4 to 6% for several years, I find CDs as a no risk opportunity to achieve my retirement performance goals, with minimal stress and risk.
If inflation stays elevated and above the CD yield, you are still losing unless you own IBond.
Still it is nowhere near as bad when the bond index fund this year, -16% YTD. You are indeed doing very well to stay positive this year while many of us are not as lucky. The CD yield will climb as long as the ST rate continues to rise. Sometime next year it may get above 5-6% yield and it become very attractive to lock in at higher rates for several years. You can also consider a CD ladder would cover all the base.
Love you, too. OJ. You're just confirming that re: anything that's worth discussing or doing or implementing, I'm always--- and always have been--- a minority of ONE. Just the way the gods have fixed it. I was surely kidnapped from a different universe as an infant and brought here. Too much bullshit NOT to notice. That's all.
This is neither Treasuries nor CDs, but caught my eye: 3.5% high-yield ordinary online bank account with Salem Five Direct, the online branch of Salem Five. Branches all over eastern Massachusetts. Mutually owned, not publicly traded. Just a $10.00 minimum. (Salem, Massachusetts.) https://www.salemfivedirect.com/
Month over month is what tells us the current inflation rate. Year over year tells us a lot about past inflation, not that much about current.
M-o-M for July was 0.0, August 0.1, and Sept. 0.4. Annualize those, and you get what the recent to current rates are ... nowhere near the year-over-year rate. But of course as prices, e.g., gasoline, fluctuate, those M-o-M figures are likely to vary, maybe quite a bit.
Apparently figures like those are how the Bloomberg Real Yield crew in mid-month managed to crow that real yield on IG debt, like their name, is back after a pretty long absence.
I'm still on the 6m T bandwagon; they're at 4.5% today with an auction coming up Monday. If 5% turns out to be the terminal Fed rate, as the RY guests lately have opined, there's still a runway prepped for higher CD and short-maturity T rates. I agree with dt that a roughly 6% peak on these safer investments is prob'ly a reasonable expectation. But if the Fed breaks something important before then, we might not make it there.
@crash, brokered CDs have many advantages over those offered at local banks. You get much better yields, many choices on different banks and duration. Or you can create your own ladder. But this May depends on your brokerages. Even Vanguard is pretty easy to trade.
Sven: "@crash, brokered CDs have many advantages over those offered at local banks. You get much better yields, many choices on different banks and duration. Or you can create your own ladder. But this May depends on your brokerages. Even Vanguard is pretty easy to trade."
I would just note that I had to "adjust" to watching my brokerage CDs change in reported value each day at my brokerage. After I bought my first brokerage CDs a few months ago, the brokerage is showing major brokerage account losses, as those CDs trade on the secondary market like stocks, bonds, mutual funds, etc. That reflects much larger loss amounts if you choose to sell them early for some reason. You will eventually get full face value of the CD on the maturation date if you hold them, plus the quoted interest rate payments, but you could experience much larger losses than bank CDs, if you decide to sell your brokerage CD before the maturation date.
"I would just note that I had to "adjust" to watching my brokerage CDs change in reported value each day at my brokerage. "
Same thing for T-bills. Major difference is liquidity. The CD market price quoted may be a work of fiction. Did the value plummet the first day due to illiquidity? Sort of like driving a new car off the lot, except with the CD you recover the paper loss at maturity.
"getting out of them early may require decent haircuts" I might have said indecent haircuts
"decent haircuts" is an interesting terminology to describe fluctuations in reported investment value of brokerage CDs. I have quite a few at the moment, and some of them are showing values 2.4% lower than the CD investment I made. Some are showing values slightly less than 1%, and others are showing losses between those amounts. You can choose to use the terminology that fits your opinion of these "losses". When I owned Bank CDs, the bank always reflected the value of my CDs as the amount I initially invested, and the penalty for early withdrawal was defined in the CD contract, normally 1 to 3 months of interest. For me, the potential of having to sell a CD at a 2.4% loss is much more concerning, than having to sell a CD that just reduces the amount of interest I earned. You never know what may come up in life that could dictate having to sell any investment, but selling a brokerage CD looks much more impacting than selling a bank CD. Buyer beware!
Well, the analogy to new cars is interesting. I'd guess that any "product" that continually changes in original cost and of which there is an almost unlimited supply will always rapidly fluctuate in perceived value as the market moves up or down. Why buy a used one if you can get a new one at the same or even better price?
As msf and others have noted, if you buy a bond or CD do so with the sole perspectives of overall safety and how much income it will generate over it's lifespan. The intermediate pricing of the instrument is just noise.
Another way to look at this is to compare to fixed mortgages. For the mortgage issuer, the perspective is similar- the issuer is concerned with safety (your ability to repay the mortgage) and how much income it will generate over it's lifespan.
At various times in my life I've made good money in second mortgages. Pretty much the same perspective- ability of the borrower to repay, intrinsic value of the property, and income generated over the second-mortgage lifespan. During that lifespan (typically a couple of years) it's "resale value" is likely nonexistent, as there's really no resale market for second mortgages.
With an FDIC CD, just find one with a rate and duration that works for you, buy it, then forget it.
Old Joe: "With an FDIC CD, just find one with a rate and duration that works for you, buy it, then forget it."
I understand the simplicity of this recommendation, but for me personally, I have a few other criteria in my CD selection process. For now, I am limiting my selection of CDs to a year or less, as I believe that longer term rates will go up significantly in the next few months, and if I am going to lock in a higher rate, I would rather do that in the next 6 to 9 months. Also, I look at bank rating criteria for the issuing bank, and I prefer A rated banks so I am not dealing with underlying instability of the issuing bank. I also try to determine if the CD is callable CD or not callable, and I personally prefer "not callable" CDs. Finally, I prefer CDs that have monthly interest paying schedules, as I can redistribute interest for other purposes more quickly. I do recommend CD investors establish their own personal selection criteria, that fits their own personal objectives, and that can lead to some variations of available CD offerings.
I also try to determine if the CD is callable CD or not callable, and I personally prefer "not callable" CDs. Finally, I prefer CDs that have monthly interest paying schedules, as I can redistribute interest for other purposes more quickly.
Yes, important point - Non-callable CDs are the way to go, especially for longer term CDs.
I would love monthly interest pay schedule CDs, but so far I am finding that only the "lesser-known" banks seem to offer those, for the most part. It limits the search greatly.
But to your main point, of course some investors may have stricter criteria and should understand the various CD options out there.
What is surprising to me is how much higher the CD interest rates offered at third-party brokerages are vs. those advertised directly from the issuers. I don't know if this is widely recognized.
JD: "I would love monthly interest pay schedule CDs, but so far I am finding that only the "lesser-known" banks seem to offer those, for the most part. It limits the search greatly."
I just took a quick look at Schwab, and most banks are not well known banks, but I did see Wells Fargo, Morgan Stanley, Capital One, Discover all offering CDs. I personally have a CD from Barclays, American Express, and Discover banks, but most of my CDs are from high rated, smaller banks, that are not well known. I also agree that I find more of the smaller banks offer the monthly dividends
I recently purchased CDs from Morgan Stanley, JPM Chase, and AMEX from FIDO, but they all pay semi-annually. I would love to buy monthly interest payout CDs, but I don't recognize most of the bank names (issuers) for those at Fido.
JD: "What is surprising to me is how much higher the CD interest rates offered at third-party brokerages are vs. those advertised directly from the issuers."
From TD Ameritrade, March 22, 2022, "Bank CDs vs Brokered CDs:Whats the Big Difference": "You may be able to find higher yields among brokered CDs than those issued by an individual bank. This is partly because of their wider selection, but it may also have to do with a broker’s ability to transact higher volumes of capital and deposits, giving them a greater degree of negotiating power (for competitive rates) with banks."
So if I go to a bank and get a CD on my own, I get a certain rate, but if I go through a broker, I get a better rate? Wait, that's not free, that better than free
It is a different channel with different pricing/promos. Brokerage CDs are expensive (when you factor in invisible platform fees of 0.35-0.50%; your quotes are net) but fast way to raise deposits. Many lesser known banks use them and the FDIC and the Fed keep an eye on who is topping these lists repeatedly.
Comments
Took me a while to figure out that Treasury Auction orders at Vanguard are shown right away only in the special area Trade Bonds & CDs order entry area, and NOT in the regular Order Status screen (they were shown after an overnight update). As there was no other indication (email, text) whether the order even registered, I found this confusing (but I know now). This in spite of a generic warning posted,
"Vanguard reserves the right to review any order submitted electronically and to subsequently approve or reject the order in accordance with Vanguard's trading policies. As a result of this review process, it's possible that the order's execution will be delayed or rejected. To monitor the status of an existing order, check the "Order Status" page."
The Order Status at Fido & Schwab are integrated and ALL orders are shown there - stocks/ETFs/CEFs, bonds, Treasury Secondary, Treasury Auction.
I put in order for new issue Muni at Schwab. Only option for order was "day only" although auction closed two or three days later.
Next day order listed as "open" but "day only" although it was a day later.
Didn't close for three days.
It would not make any difference f Schwab had "Sweep" money markets but they don't, so for order to fill had to make sure you kept cash for order in account although oder status listed as "day only
I called them and went around and around. They admitted it was confusing and their bad but would not commit to easy fix
Agree with Sven & dtconroe.
Still it is nowhere near as bad when the bond index fund this year, -16% YTD. You are indeed doing very well to stay positive this year while many of us are not as lucky. The CD yield will climb as long as the ST rate continues to rise. Sometime next year it may get above 5-6% yield and it become very attractive to lock in at higher rates for several years. You can also consider a CD ladder would cover all the base.
3.5% high-yield ordinary online bank account with Salem Five Direct, the online branch of Salem Five. Branches all over eastern Massachusetts. Mutually owned, not publicly traded. Just a $10.00 minimum. (Salem, Massachusetts.)
https://www.salemfivedirect.com/
M-o-M for July was 0.0, August 0.1, and Sept. 0.4. Annualize those, and you get what the recent to current rates are ... nowhere near the year-over-year rate. But of course as prices, e.g., gasoline, fluctuate, those M-o-M figures are likely to vary, maybe quite a bit.
Apparently figures like those are how the Bloomberg Real Yield crew in mid-month managed to crow that real yield on IG debt, like their name, is back after a pretty long absence.
I'm still on the 6m T bandwagon; they're at 4.5% today with an auction coming up Monday. If 5% turns out to be the terminal Fed rate, as the RY guests lately have opined, there's still a runway prepped for higher CD and short-maturity T rates. I agree with dt that a roughly 6% peak on these safer investments is prob'ly a reasonable expectation. But if the Fed breaks something important before then, we might not make it there.
https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202210
I would just note that I had to "adjust" to watching my brokerage CDs change in reported value each day at my brokerage. After I bought my first brokerage CDs a few months ago, the brokerage is showing major brokerage account losses, as those CDs trade on the secondary market like stocks, bonds, mutual funds, etc. That reflects much larger loss amounts if you choose to sell them early for some reason. You will eventually get full face value of the CD on the maturation date if you hold them, plus the quoted interest rate payments, but you could experience much larger losses than bank CDs, if you decide to sell your brokerage CD before the maturation date.
Stick to liquid Treasuries if selling early is even a slim possibility.
Generally, these instruments (Treasuries, CDs) are to be held to maturity.
Same thing for T-bills. Major difference is liquidity. The CD market price quoted may be a work of fiction. Did the value plummet the first day due to illiquidity? Sort of like driving a new car off the lot, except with the CD you recover the paper loss at maturity.
"getting out of them early may require decent haircuts"
I might have said indecent haircuts
As msf and others have noted, if you buy a bond or CD do so with the sole perspectives of overall safety and how much income it will generate over it's lifespan. The intermediate pricing of the instrument is just noise.
Another way to look at this is to compare to fixed mortgages. For the mortgage issuer, the perspective is similar- the issuer is concerned with safety (your ability to repay the mortgage) and how much income it will generate over it's lifespan.
At various times in my life I've made good money in second mortgages. Pretty much the same perspective- ability of the borrower to repay, intrinsic value of the property, and income generated over the second-mortgage lifespan. During that lifespan (typically a couple of years) it's "resale value" is likely nonexistent, as there's really no resale market for second mortgages.
With an FDIC CD, just find one with a rate and duration that works for you, buy it, then forget it.
I understand the simplicity of this recommendation, but for me personally, I have a few other criteria in my CD selection process. For now, I am limiting my selection of CDs to a year or less, as I believe that longer term rates will go up significantly in the next few months, and if I am going to lock in a higher rate, I would rather do that in the next 6 to 9 months. Also, I look at bank rating criteria for the issuing bank, and I prefer A rated banks so I am not dealing with underlying instability of the issuing bank. I also try to determine if the CD is callable CD or not callable, and I personally prefer "not callable" CDs. Finally, I prefer CDs that have monthly interest paying schedules, as I can redistribute interest for other purposes more quickly. I do recommend CD investors establish their own personal selection criteria, that fits their own personal objectives, and that can lead to some variations of available CD offerings.
I would love monthly interest pay schedule CDs, but so far I am finding that only the "lesser-known" banks seem to offer those, for the most part. It limits the search greatly.
But to your main point, of course some investors may have stricter criteria and should understand the various CD options out there.
What is surprising to me is how much higher the CD interest rates offered at third-party brokerages are vs. those advertised directly from the issuers. I don't know if this is widely recognized.
I just took a quick look at Schwab, and most banks are not well known banks, but I did see Wells Fargo, Morgan Stanley, Capital One, Discover all offering CDs. I personally have a CD from Barclays, American Express, and Discover banks, but most of my CDs are from high rated, smaller banks, that are not well known. I also agree that I find more of the smaller banks offer the monthly dividends
I would love to buy monthly interest payout CDs, but I don't recognize most of the bank names (issuers) for those at Fido.
@dtconroe- yes, your "other criteria" is covered by my "that works for you" clause.
From TD Ameritrade, March 22, 2022, "Bank CDs vs Brokered CDs:Whats the Big Difference": "You may be able to find higher yields among brokered CDs than those issued by an individual bank. This is partly because of their wider selection, but it may also have to do with a broker’s ability to transact higher volumes of capital and deposits, giving them a greater degree of negotiating power (for competitive rates) with banks."