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I’ve been buying longer term CDs (3-5 years) lately based on my presumption that rates were peaking. I was able to buy a number of call protected issues with yields all exceeding 5%, but available yields have dropped to 4.5-4.7% over the past couple weeks, so I’m glad that I acted when I did. However, I have a number of Treasuries maturing from December through March, and I’m afraid that yields exceeding 5% will not be available by then.
Some large slugs of CP New Issues were posted on Fido (and I assume all brokerage platforms) this AM as is the usual case on Mondays and Tuesdays. (Other days as well, but M&T are usually the larger load days.)
One of the caveats of placing New Issue CD Orders is that they sit in queue pending BUY on the Settlement Date. So you're still "in the game" so to speak, whether you know it or not!
To wit: I had two pending New Issue, CP, CD Orders in queue at Fido from last week, one 4-yr and one 5-yr. For each maturity, newly posted New Issues today are 0.05% higher for each of my respective pending Orders.
So...I duly Cancelled my two pending Orders and entered two new BUYs for the fractionally higher ones. Bottom Line? An extra $225 in my pocket over the life of the CDs for all of 10 minutes work today.
Also...These two newbies do not have Settlement Dates until Dec 5 (NOTE: Many times they settle a coupla days BEFORE the Settlement Date) so I will stay vigilant as they pend, watching for any other ticks UP, until the BUYs execute in hopes of pocketing a few more bucks. If so, Rinse, Repeat. (Two lines I ALWAYS wait in - FREE ice cream and FREE money!)
Easy Peezy! (Lookin' at you Joey, Sr!)
Aside: This is overall mildly GOOD news for prospective CD BUYers. The most recent trend (from early Nov) was definitely lower inventory offerings and CD rates DOWN. (And LOTS of BUYers gobbling up turkey, er, the inventories.) Very nice to see some BIG adds to the inventories that were (at least) fractionally HIGHER than the last inventory loads.
This might also be mildly good news for prospective new issue T-bill buyers. If I remember correctly, the expected yield on a 6 month T-bill was 5.42% on Wednesday and 5.45% on Friday.
Unlike new CDs, when you put in an "indication of interest" in a new T-bill, your rate is not locked in. Expectations rise and fall; what matters is what happens at the actual auction.
I should note that it was only ONE bank that loaded large, new inventories of New Issue CP CDs on Monday on Fido's platform, but it was a whopping 40K-60K of CP CDs in most of the respective maturities. No other (same or better rates) new offerings have shown up yet today.
It will be interesting to see how this unfolds in the coming weeks as we have a batch of CDs maturing late Dec-early May.
So, an interesting development on the CDs I've posted about here recently.
The previously referenced bank that had loaded 40K-60K of CP CDs in most of the respective maturities (2-yrs thru 5-yrs) accelerated the execution of the Settlement of my two BUYs.
More importantly to others, they pulled all of the outstanding Quantities from the Fido platform.
Not sure what happened there. I've spoken several times over the years to very experienced Fido FI guys and been told institutions sometimes goof on BUYs and their errored/re-thunk BUYs duly end up on the Secondary Issues lists.
Perhaps this bank goofed on the loading side? I dunno. (But I think it did!) I do know I've never seen this happen before.
Bottom Line: The trend continues DOWN on available CP CD rates and Quantities Available.
Thanks. Understood. I thought it to be worth sharing that NORTHEAST BANK is offering up to 15 month CD at 5.3% yield. FDIC insured, of course. Branches are in Maine, but of course, a money transfer ought to be routine with account number and routing number. ($5k minimum.) https://www.northeastbank.com/
Yep, CD rates are lower. It was just a few weeks ago that CD rates for many time periods were 5.5%. Longer term rates over 5% are disappearing. So, it does challenge investors with maturing CDs and ample amounts of cash, to determine where they want to invest with a downward trend in CDs. I will be wrestling with my options in December, as I have numerous CDs reaching maturity. 5% options for CDs are still attractive to me, but it is hard to predict how much longer they will exist.
Isn't the reason for CD rates dropping the same reason bond funds should increase return? Seems like it may be time to start transitioning back to bond funds (?). What do others think?
Anytime we talk about CD rates we should always be sure to reference if they are CP or Not CP. BIG difference in the rates and Available Quantities, as well as the strategies/consequences of holding either.
FWIW, I rarely if ever post about Not CP CDs as I have ZERO interest in ever owning one in concert with my overall strategy on FI. All comments that follow are therefore related to brokered, CP CDs.
Brokered, CP rates for 3-yr to 5-yr CP CDs peaked at about 5.20% to 5.10% (based on my tracking, but they coulda inched a wee bit higher) respectively at two different times in 2023, several months ago and a coupla weeks ago.
They are now GONE and we are unlikely to see them again in this interest rate cycle. That said, the topic after all is interest rates, so the direction and magnitude of moves is always a roll of the dice.
Currently, the best brokered, CP rates (and Available Quantities) on Fido for these maturities are 3-yr: 4.65% (6,000) 4-yr: 4.60% (2,200) 5-yr: (None)
I suggested to investors here many months ago to try to NOT be short-sighted (and star struck) with the relatively higher rates on 3-months to 18-month CDs IF they were planning on creating a longer term CD ladder and/or wanted to take advantage of CD opportunities not seen for many prior years.
I suggested those 5+% CP longer term rates would disappear quickly and once they were gone, they would likely be gone for many years...again. Luckily, we all had two swipes at them as noted above. Some acted. Some did not. I acted and built our CD ladder out 5 years.
Those who didn't act are left with the types of questions posted by some of the most recent posters: What to do now?
Yeah, the drop in the 10-yr and CD rates SHOULD improve bond fund TRs BUT that's the rub: Do you want FDIC'd, CP, guaranteed rates of a CD ladder in the 5+% range, or do you want to roll the dice on bond funds, and IMO, basically the hope that you'll match the CD ladder TR? Plenty of worthy arguments on both sides but I will always choose the former based on my minimum FI hurdle and risk/reward considerations. Others had at least two opportunities this year to do the same but it appears they no longer will. So TMMV, and likely will.
For anyone still interested in guaranteed interest rates for the FI portion of their port... CP CD rates continue to tick DOWN, and with it the opportunity to build a 5-yr CP CD ladder yielding a rate near 5% continues to disappear.
A few years back & I was happy to get 3% on a two year CD. I see 3 year notes are on the firing line & will put forth a few $$'s that way. Have a good weekend, Derf
Admitting that I have a lack of knowledge, I decided to hire an advisor who was recommended to me by a couple of friends who have used him for many years. I pay him by the hour and he is charging me 3 hours which I feel is reasonable.
I am 71 and will retire in 6 months to one years time so this isn't a retirement advice. I am very conservative with money. My objective is to generate as much as income as possible form the interest .I have a decent amount of social security in addition to this as I have worked for 50 plus years and didn't claim SS until I was 70.
My question: I think it would be good to lock in 5 or even 10 year CD's rates as they are north of 4% and that would yield a decent amount of returns. I am concerned if I use CD ladders, the rates which are going to fall sooner than later might end up losing me money in the end.
I will meet with him soon and he will answer any questions/concerns I have. I would greatly appreciate your opinion and or advice as this would enable me to ask him questions.
His comments: Goal: To move cash to longer maturity CDs/Treasuries to take advantage of relatively high interest rates over a longer period of time.
Things that can be done now: In your Company 401k Brokerage link: Buy a $100k 2-year CD. (Non-callable) Buy a $90k 3-year CD. (non-callable) Buy a ~$87k 4-year CD. (non-callable)
In Feb ’24 when the Bank CD in the IRA matures: Invest 100k in a 1-year CD. Invest $100k in an 5 year CD. Leave ~$17k in cash.
In March ’24 when the CDs in the Bank taxable account mature: Buy a $70k 1-year CD. Buy a $70k 2-year CD. (no penalty)
Other things to note: If we build this CD ladder, eventually you will get the average 5-year rate. When a 1-year CD matures, you can buy a 5-yearCD. There should be at least one CD maturing every 12 months.
I have intentionally left cash in the IRA and “non-CD” funds in the 401k. This because at some stage you will have RMDs and we don’t want the CD ladder to interfere with taking them.
I think the taxable CDs should be in 24-month intervals. This will give you added financial flexibility in retirement.
Disclaimer: You likely gave your advisor the detail of your current investments and your projected income gap upon retirement, along with risk profile information. That is all needed for anyone here or elsewhere to provide quality advice.
Without all that, here's what I'd offer you as suggestions/ideas:
Know that predicting the future of interest rates, their rates and the magnitude of their moves, is a fool's game.
Only BUY brokerage CDs IF you reasonably KNOW you will NOT need the proceeds before their respective maturity dates. Selling them as Secondary Issues will cost you dearly at this point in time (and likely for months/years to come), IF you can be lucky enough to find a BUYer.
Only BUY CP CDs to eliminate the guessing game on your holdings and risk of them being Called before their normal Maturity Date.
Know that 3-month-to-1-yr rates are holding up the best, and LT rates (out to 5-10 years) are taking weekly, if not daily hits. Consider that trend is likely-to-very likely to continue, which should cause you to consider building the far end of the ladder as soon as possible.
The "do now" stuff appears fine but I would make any current the BUYs on the farthest ends of your ladder.
I'd not bother with trying to define any specific BUYs in Feb and Mar '24, or even Jan '24. (See my first comment about predicting the future interest rates.) We can guess what's gonna be available then, but we have no certainty those guesses will be anywhere near accurate. You can have a general plan for future dates, but leave the specifics TBD by your research in the week-to-two weeks leading up to getting those proceeds.
I have no idea why he recommended the last item related to CDs in your taxable a/c best serving you IF at 2-yr intervals. I have no CDs in taxable a/c's. If I did, I would want them to be the ones at the shorter end of my ladder for the very reason he gave, to "give you added financial flexibility in retirement." 2-year CDs does NOT give you the flexibility (not the interest rates!) that 6-month, 1-yr and 18-month CDs would.
OK, so since I can't say I will never withdraw from a brokerage CD, I will transfer them from the 401k to a Bank IRA.
I will make sure all CD are call protected
I don't quite understand the 3 month to 1 year rates holding up better and building the far end of the ladder. With the info I've given can you show me how that would look?
Same for the next line - not sure what current BUYs on farthest end of ladders.
I think I understand not bothering the Jan and March BUY's - wait until a couple of weeks before they expire to decide as it's a guessing game until then.
I don't understand the last paragraph. I currently have a one year no penatly CD and a another one penalty CD for the amounts shown. Not sure how to make them non-taxable.
Can you modify my plan above to show me what you would do it. I realize you are not giving me advice - it's only an example. I know you don't know all of the facts. Are you an advisor (just curious). Thanks in advance!
OK, so since I can't say I will never withdraw from a brokerage CD, I will transfer them from the 401k to a Bank IRA. Nothing against your advisor, and this may well have been discussed, but if it was not... This point is a cornerstone of CD ownership that a client should have learned in even ONE fee-based hour. EDIT: I've bought plenty of Secondary Issue CP CDs for Discounts. I hope to never be in a position to have to TRY to sell one, unless of course for a Premium!
I will make sure all CD are call protected CP is a CD ladder holders friend.
I don't quite understand the 3 month to 1 year rates holding up better and building the far end of the ladder. With the info I've given can you show me how that would look? All comments here are about brokerage, CP CDs. Bank CP CD data may/will vary. Up to one year rates are not very far down from their respective peaks and still at/above 5%. To wit, 3-month rates peaked around 5.50% and are still at 5.35%. On the far end, 5-yr rates peaked around 5.05% but are now DOWN to 4.40%. They are consistently dropping 0.05% and their Available Quantities are significantly DOWN. (FWIW, I've been pointing this up for months on these threads.)
Same for the next line - not sure what current BUYs on farthest end of ladders. Farthest end of the ladder for this discussion is 5 years, or IF you plan to go out further, 10 years. To wit, the "short end of the curve" is the % closest to ZERO.
I think I understand not bothering the Jan and March BUY's - wait until a couple of weeks before they expire to decide as it's a guessing game until then. Don't bother with the specifics until then. We have only educated guesses as to what respective rates and quantities will be available then. With interest rates, I always try to deal with what we know NOW. We know the current rates, available quantities and the current trend(s). We did have that period over the past coupla years where we were reasonably certain the Fed was going to raise rates. We're still in the guessing stage on what happens next and when.
I don't understand the last paragraph. I currently have a one year no penalty CD and a another one penalty CD for the amounts shown. Not sure how to make them non-taxable. Seems to be a misunderstanding on this. I did NOT suggest anything in your txbl a/c could be made non-txbl. Suggest re-reading what I posted and quote the line(s) you don't understand.
Can you modify my plan above to show me what you would do it. Hmm...I've kinda put a wee bit of effort in here already, no? If you re-read my post and factor in these responses, you should be able to do that. Seems kinda clear to me, no?
I realize you are not giving me advice - it's only an example. I know you don't know all of the facts. Are you an advisor (just curious). Thanks in advance! You're welcome. No, not an advisor. Life-time bean counter, governmental and private audit manager. Grew up as many did wanting to "be able to live off the interest." Life-long manager of portfolios of several, never-paying* friends and relatives. Owned CD ladders for ~15 years. * = And I have never asked them!
Sorry, I'm an interloper in this thread. Just found a(nother) short-term promo CD for 8 or 11 months at Byline Bank. Chicago area. 5.45% yield. With a $5k minimum.
Like @stillers, I jumped on new issue CDs when rates topped 5%, and I’m glad that I did. I’ve got CD ladders extending out 5 years in several IRAs and our taxable savings, with an overall yield about 5.1%. The last issues I bought were 4 and 5 year terms yielding 5.05 to 5.1%, and the best yields in that range have dropped 0.5-0.8% over the past couple weeks. All my CDs are non-callable except for a few shorter term issues that are unlikely to be called.
Comments
One of the caveats of placing New Issue CD Orders is that they sit in queue pending BUY on the Settlement Date. So you're still "in the game" so to speak, whether you know it or not!
To wit: I had two pending New Issue, CP, CD Orders in queue at Fido from last week, one 4-yr and one 5-yr. For each maturity, newly posted New Issues today are 0.05% higher for each of my respective pending Orders.
So...I duly Cancelled my two pending Orders and entered two new BUYs for the fractionally higher ones. Bottom Line? An extra $225 in my pocket over the life of the CDs for all of 10 minutes work today.
Also...These two newbies do not have Settlement Dates until Dec 5 (NOTE: Many times they settle a coupla days BEFORE the Settlement Date) so I will stay vigilant as they pend, watching for any other ticks UP, until the BUYs execute in hopes of pocketing a few more bucks. If so, Rinse, Repeat. (Two lines I ALWAYS wait in - FREE ice cream and FREE money!)
Easy Peezy! (Lookin' at you Joey, Sr!)
Aside: This is overall mildly GOOD news for prospective CD BUYers. The most recent trend (from early Nov) was definitely lower inventory offerings and CD rates DOWN. (And LOTS of BUYers gobbling up turkey, er, the inventories.) Very nice to see some BIG adds to the inventories that were (at least) fractionally HIGHER than the last inventory loads.
Unlike new CDs, when you put in an "indication of interest" in a new T-bill, your rate is not locked in. Expectations rise and fall; what matters is what happens at the actual auction.
It will be interesting to see how this unfolds in the coming weeks as we have a batch of CDs maturing late Dec-early May.
The previously referenced bank that had loaded 40K-60K of CP CDs in most of the respective maturities (2-yrs thru 5-yrs) accelerated the execution of the Settlement of my two BUYs.
More importantly to others, they pulled all of the outstanding Quantities from the Fido platform.
Not sure what happened there. I've spoken several times over the years to very experienced Fido FI guys and been told institutions sometimes goof on BUYs and their errored/re-thunk BUYs duly end up on the Secondary Issues lists.
Perhaps this bank goofed on the loading side? I dunno. (But I think it did!) I do know I've never seen this happen before.
Bottom Line: The trend continues DOWN on available CP CD rates and Quantities Available.
https://www.northeastbank.com/
FWIW, I rarely if ever post about Not CP CDs as I have ZERO interest in ever owning one in concert with my overall strategy on FI. All comments that follow are therefore related to brokered, CP CDs.
Brokered, CP rates for 3-yr to 5-yr CP CDs peaked at about 5.20% to 5.10% (based on my tracking, but they coulda inched a wee bit higher) respectively at two different times in 2023, several months ago and a coupla weeks ago.
They are now GONE and we are unlikely to see them again in this interest rate cycle. That said, the topic after all is interest rates, so the direction and magnitude of moves is always a roll of the dice.
Currently, the best brokered, CP rates (and Available Quantities) on Fido for these maturities are
3-yr: 4.65% (6,000)
4-yr: 4.60% (2,200)
5-yr: (None)
I suggested to investors here many months ago to try to NOT be short-sighted (and star struck) with the relatively higher rates on 3-months to 18-month CDs IF they were planning on creating a longer term CD ladder and/or wanted to take advantage of CD opportunities not seen for many prior years.
I suggested those 5+% CP longer term rates would disappear quickly and once they were gone, they would likely be gone for many years...again. Luckily, we all had two swipes at them as noted above. Some acted. Some did not. I acted and built our CD ladder out 5 years.
Those who didn't act are left with the types of questions posted by some of the most recent posters: What to do now?
Yeah, the drop in the 10-yr and CD rates SHOULD improve bond fund TRs BUT that's the rub: Do you want FDIC'd, CP, guaranteed rates of a CD ladder in the 5+% range, or do you want to roll the dice on bond funds, and IMO, basically the hope that you'll match the CD ladder TR? Plenty of worthy arguments on both sides but I will always choose the former based on my minimum FI hurdle and risk/reward considerations. Others had at least two opportunities this year to do the same but it appears they no longer will. So TMMV, and likely will.
https://www.acronymattic.com/TMMV.html
Others = Their Mileage May Vary
CP CD rates continue to tick DOWN, and with it the opportunity to build a 5-yr CP CD ladder yielding a rate near 5% continues to disappear.
Have a good weekend, Derf
I am 71 and will retire in 6 months to one years time so this isn't a retirement advice. I am very conservative with money. My objective is to generate as much as income as possible form the interest .I have a decent amount of social security in addition to this as I have worked for 50 plus years and didn't claim SS until I was 70.
My question: I think it would be good to lock in 5 or even 10 year CD's rates as they are north of 4% and that would yield a decent amount of returns. I am concerned if I use CD ladders, the rates which are going to fall sooner than later might end up losing me money in the end.
I will meet with him soon and he will answer any questions/concerns I have. I would greatly appreciate your opinion and or advice as this would enable me to ask him questions.
His comments:
Goal:
To move cash to longer maturity CDs/Treasuries to take advantage of relatively high interest rates over a longer period of time.
Things that can be done now:
In your Company 401k Brokerage link:
Buy a $100k 2-year CD. (Non-callable)
Buy a $90k 3-year CD. (non-callable)
Buy a ~$87k 4-year CD. (non-callable)
In Feb ’24 when the Bank CD in the IRA matures:
Invest 100k in a 1-year CD.
Invest $100k in an 5 year CD.
Leave ~$17k in cash.
In March ’24 when the CDs in the Bank taxable account mature:
Buy a $70k 1-year CD.
Buy a $70k 2-year CD. (no penalty)
Other things to note:
If we build this CD ladder, eventually you will get the average 5-year rate. When a 1-year CD matures, you can buy a 5-yearCD. There should be at least one CD maturing every 12 months.
I have intentionally left cash in the IRA and “non-CD” funds in the 401k. This because at some stage you will have RMDs and we don’t want the CD ladder to interfere with taking them.
I think the taxable CDs should be in 24-month intervals. This will give you added financial flexibility in retirement.
Disclaimer: You likely gave your advisor the detail of your current investments and your projected income gap upon retirement, along with risk profile information. That is all needed for anyone here or elsewhere to provide quality advice.
Without all that, here's what I'd offer you as suggestions/ideas:
Know that predicting the future of interest rates, their rates and the magnitude of their moves, is a fool's game.
Only BUY brokerage CDs IF you reasonably KNOW you will NOT need the proceeds before their respective maturity dates. Selling them as Secondary Issues will cost you dearly at this point in time (and likely for months/years to come), IF you can be lucky enough to find a BUYer.
Only BUY CP CDs to eliminate the guessing game on your holdings and risk of them being Called before their normal Maturity Date.
Know that 3-month-to-1-yr rates are holding up the best, and LT rates (out to 5-10 years) are taking weekly, if not daily hits. Consider that trend is likely-to-very likely to continue, which should cause you to consider building the far end of the ladder as soon as possible.
The "do now" stuff appears fine but I would make any current the BUYs on the farthest ends of your ladder.
I'd not bother with trying to define any specific BUYs in Feb and Mar '24, or even Jan '24. (See my first comment about predicting the future interest rates.) We can guess what's gonna be available then, but we have no certainty those guesses will be anywhere near accurate. You can have a general plan for future dates, but leave the specifics TBD by your research in the week-to-two weeks leading up to getting those proceeds.
I have no idea why he recommended the last item related to CDs in your taxable a/c best serving you IF at 2-yr intervals. I have no CDs in taxable a/c's. If I did, I would want them to be the ones at the shorter end of my ladder for the very reason he gave, to "give you added financial flexibility in retirement." 2-year CDs does NOT give you the flexibility (not the interest rates!) that 6-month, 1-yr and 18-month CDs would.
I will make sure all CD are call protected
I don't quite understand the 3 month to 1 year rates holding up better and building the far end of the ladder. With the info I've given can you show me how that would look?
Same for the next line - not sure what current BUYs on farthest end of ladders.
I think I understand not bothering the Jan and March BUY's - wait until a couple of weeks before they expire to decide as it's a guessing game until then.
I don't understand the last paragraph. I currently have a one year no penatly CD and a another one penalty CD for the amounts shown. Not sure how to make them non-taxable.
Can you modify my plan above to show me what you would do it. I realize you are not giving me advice - it's only an example. I know you don't know all of the facts. Are you an advisor (just curious). Thanks in advance!
(Quarterly compounding.)
https://www.bylinebank.com/rates/#personal