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"Schwab found ways to earn back quickly that account transfer bonus they gave me"
But of course. Every business needs to make a profit somehow. You can bet that Fidelity or any other brokerage is also shaving a few dollars here and there. Just go down a couple of threads and see Vanguard charging to get out.
Yep. I am all in favor of everyone I do business with being profitable and thriving.
My Treasury positions at Schwab and Fidelity matured on June 15 (Saturday). ... Schwab did not show anything last night and added to cash this [Tuesday] AM.
Unlike Fidelity (at least from what other posters here have written), you can trade online at Schwab without having sufficient cash in your account at the time a trade is executed. You just need to get that cash into the account by settlement day (or you are set up to trade on margin).
In hindsight (putting on those 20/20 goggles), you could have placed your MMF order on Monday. It would have settled on Tuesday (today) and the Treasury proceeds would have covered it. The MMF would then have started accruing divs today.
This was in an IRA. I already tried unsuccessfully that idea in that account at the end of May when I had a smaller Treasury mature. Unless there is cash in the account, Schwab does not allow me (or broker assisted) to place a buy order in the IRA.
Have you tried with limited margin? This is not true margin (borrowing), which is forbidden in an IRA, but simply the ability to trade against unsettled cash. Or so I read:
The Limited Margin feature allows for trading on unsettled funds ...
Just took a look at available CDs at Schwab. There has been a huge reduction of CD offerings over the past few weeks. I would say the "Compelling" period has passed for now, and there are only a handful off offerings for any term over 6 months. Looks like Banks are in a holding mode for now, evaluating what they are willing to offer in CD world. I have a little investing cash left in Money Market accounts, but I see nothing that excites me in CD world right now.
It's true that there are only a handful of offerings right now, but I just took a quick and arbitrary look at 3 years out and there are eight between 4.7 and 4.85%. I might do a Morgan Stanley in those, because how much longer will Moneymarket SUTXX be paying 5.18%?
Add: In Treasuries, 7 offerings @4.55% maturing 1/27. Another possibility.
Or the 2y T showing at 4.74 right now; auction 6/25 if that's appealing. I'll prob'ly take a bite of that in the taxable account if the yield holds up fairly well between now and then.
@AndyJ - I’m lookin’ at the 2-yr treasury as well, and wondering if on 6/24 it’ll still be 4.74? Vanguard is showing 4.734.
Right, it's fairly common for yields to sell off even the morning of an auction. I've seen that enough, I don't put in an order now until ten minutes or so before the close at 10a Eastern.
I have noticed MM rates at Schwab have started declining again--not major drops but it seems every 7 days, the rates have reset and dropped a bit. Who knows what the Feds will do, but no doubt there is increasing pressure on them to cut rates.
Fed fund rate has been 5.25-5.50% since July 2023. But expectations of Fed actions have changed.
The 3-mo T-Bill yields peaked at 5.348% in October 2023, and have recently dropped to 5.215%. M-mkt funds track 3-mo T-bills closely, with most of the differences coming from their ERs. Comparable government m-mkt funds are SNVXX (Schwab), SPAXX (Fido), VMFXX (Vanguard); there are better m-mkt funds with higher min and/or other restrictions; see a nearby thread by @msf. https://stockcharts.com/h-sc/ui?s=$IRX&p=D&yr=1&mn=0&dy=0&id=p79674660313
FRNs that reset weekly to 3-mo T-Bills have variable rate at 5.32%. FRN ETFs are USFR, TFLO.
Yes, it seems that all of the adjustments in CD rates have been predicated on various banks trying to read the future, rather than any actual significant changes in the Fed fund rates for the last year or so.
Still seeing 5.29% 7-day SEC yield (5.42% compound yield) on VUSSX Treasury Money Market Fund. Vanguard one year brokered CD's 5.5% (JP Morgan callable) could be a reasonable place to park cash.
JPMorgan callables are sucker bait. They will be called, and as soon as possible.
I think one should always expect a callable CD to be called and plan accordingly. That's why they pay higher than non-callable.
I reserve the term "sucker bait" for introductory high yield bank CDs that automatically roll over to some lower rate before you can get out. Even if you get a free toaster.
Speaking as one of those suckers, I'll see what happens with my JPMorgan CD, possibly called in two days. It's still being quoted at 0.003% below purchase price, let alone price plus accrued interest.
I picked it up at the end of last year to hold cash in my inherited Roth for this year's RMD. It locked in a good rate (5.35%) for at least six months (if called) and at most 9 months (maturity). I'm still expecting it not to be called, but if it is I can pick up a 3 or 4 month CD (non-callable) at 5.45%.
@Old_Joe said: JPMorgan callables are sucker bait. They will be called, and as soon as possible.
Only sucker bait if you don't expect the call, Dan. I've bought quite a few CDs and Gov. Agency bonds that have been called, but you can play that game to eek out a couple more dollars, I think. The purchase description will tell you when the "next callable date" is and the call schedule thereafter. So if you buy a 10 year bond with a 6% rate and it lasts a minimum of 3 or even 6 months, that seems better to me than getting 5% or less return on a 3-6 month non-callable CD.
Maybe I'm missing something with this logic. If so, I am a sucker. Been there many times.
JPMorgan callables are sucker bait. They will be called, and as soon as possible.
Respectfully disagree. I was looking for a good 1 yr cd. I found a new 5 yr cd paying 6% (Goldman Sachs, better than any 1yr rate I could find) which is callable in 1 year. If it gets called in a year I'm happy as that was my target, if not I'll let the 6% cd ride.
It's all a matter of allocating risk and how well you're compensated for taking on more risk.
If you get a long term, non-callable CD, you're assuming the risk that rates won't rise (opportunity cost) while receiving a guarantee that your return won't fall. The bank is taking the opposite side of that wager - that rates won't fall (bank's opportunity cost) while receiving a guarantee that it has the use of your money for years even if rates rise.
If you get a long term, callable CD, you're hoping that rates remain fairly stable. You're assuming the risks that: (a) rates won't fall more than a little (or you'll lose your long term CD), and (b) rates won't rise more than a little (else that little rate premium won't make up for the higher rates (opportunity cost) you could have gotten after a shorter CD matured.
The higher return on the callable CD is primarily to compensate you for assuming the risk that rates will fall and you'll lose your locked-in rate. The risk of being locked in as rates rise is the same for callable and non-callable CDs.
JPMorgan callables are sucker bait. They will be called, and as soon as possible.
I reserve the term "sucker bait" for introductory high yield bank CDs that automatically roll over to some lower rate before you can get out. Even if you get a free toaster.
I have several Capital One CDs, paying over 5%. When I set those up, I was given choices of what happens to the maturing CDs, and my choice was for them to be deposited into a High Yield Savings Account, currently paying over 4%. When those proceeds are placed into my Savings Account, I will decide whether I want to re-invest in future CDs at Capital One, or transfer them to my Schwab Account for options there, including CDs or MMs or open end Mutual Funds, etc etc.
Can I ask a, perhaps, dumb question? If I have a CD maturing on June 30, 2024, and the bank involved lowered their rate as of the end of the month, which rate do I get, the rate they listed for the new CD term pre-expiration or post-expiration assuming I renew the CD at maturity?
@Anna- My experience with CDs is that the renewal rate will be whatever the bank is paying at that time, not at the original rate. However my experience with that situation is strictly with CDs issued by my bank directly- not with brokered CDs. I may be wrong but I don't think that brokered CDs are renewable.
@MikeM- I apologize for that unfortunate phrasing. You are playing the game by a different set of rules, and that works too. What I meant was it's a sucker's game if you are counting on a long-term income stream, because if you choose a 3 year callable MorganChase because it pays slightly more than a non-callable 3-year, and rates go down even a little, that MorganChase is going to be called and your 3-year plan goes poof.
When I first started buying CDs for a ladder in early 2023, I bought a bunch of callable CDs, not realizing the distinction. So far, only one has been called in, and I was able to reinvest at the same or a higher rate. So, I’ve been benefiting from the higher yields all this time, roughly 0.3-0.5% higher.
I'll see what happens with my JPMorgan CD, possibly called in two days. ...
I picked it up at the end of last year to hold cash in my inherited Roth for this year's RMD. It locked in a good rate (5.35%) for at least six months (if called) and at most 9 months (maturity). I'm still expecting it not to be called, but if it is I can pick up a 3 or 4 month CD (non-callable) at 5.45%.
To my surprise, it was called today. I picked up a 5 month CD (maturing at the beginning of Dec, just in time for my RMD) at 5.40%. Fidelity sells "fractional" CDs, so I was able to put the interest I received to work in a 3 month CD at 5.45%.
Given these rates, I don't understand why JPMorgan called my CD, but I'm not complaining.
Side note: Does Schwab offer fractional CDs (units of $100 instead of $1000)? I just opened a Schwab account and don't see this product offered.
Side note: Does Schwab offer fractional CDs (units of $100 instead of $1000)? I just opened a Schwab account and don't see this product offered.
@msf, multiples of $1000 is all I've ever seen at Schwab. And as I think @Old_Joe mentioned, you are almost guaranteed to have a JP Morgan CD called, so you have to be aware of the 1st call date to make the buy worth it. But you are right. It doesn't make a lot of sense to call one and offer another at the same rate or slightly better. Maybe they pick up a day or 2 using your money during the transaction without paying you interest. Their must be some gimmick working in their favor.
I didn't mean to imply that JPMorgan was offering these rates. The only JPMorgan CD Fidelity shows is for one year. But that's at 5.40%, so the bank clearly knows this is the going rate and it could have held onto my money for three more months for less (5.35%).
The interest was deposited into my brokerage account today (call date), so JPM got no free float. Maybe it couldn't put my money to use (lend it out) at a higher rate right now. Who knows? The bank is apparently happy and I'm getting a higher interest rate. Win-win.
JPMorgan CDs are fine- very safe (if the FDIC needs to rescue JPM it's likely that the whole show is over anyway), but predictably called early on. As long as this works for you, no problem at all.
Comments
Add: In Treasuries, 7 offerings @4.55% maturing 1/27. Another possibility.
https://stockcharts.com/h-sc/ui?s=$UST2Y&p=D&b=5&g=0&id=p64547483100
https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202406
The 3-mo T-Bill yields peaked at 5.348% in October 2023, and have recently dropped to 5.215%. M-mkt funds track 3-mo T-bills closely, with most of the differences coming from their ERs. Comparable government m-mkt funds are SNVXX (Schwab), SPAXX (Fido), VMFXX (Vanguard); there are better m-mkt funds with higher min and/or other restrictions; see a nearby thread by @msf.
https://stockcharts.com/h-sc/ui?s=$IRX&p=D&yr=1&mn=0&dy=0&id=p79674660313
FRNs that reset weekly to 3-mo T-Bills have variable rate at 5.32%. FRN ETFs are USFR, TFLO.
I reserve the term "sucker bait" for introductory high yield bank CDs that automatically roll over to some lower rate before you can get out. Even if you get a free toaster.
Speaking as one of those suckers, I'll see what happens with my JPMorgan CD, possibly called in two days. It's still being quoted at 0.003% below purchase price, let alone price plus accrued interest.
I picked it up at the end of last year to hold cash in my inherited Roth for this year's RMD. It locked in a good rate (5.35%) for at least six months (if called) and at most 9 months (maturity). I'm still expecting it not to be called, but if it is I can pick up a 3 or 4 month CD (non-callable) at 5.45%.
Maybe I'm missing something with this logic. If so, I am a sucker. Been there many times
If you get a long term, non-callable CD, you're assuming the risk that rates won't rise (opportunity cost) while receiving a guarantee that your return won't fall. The bank is taking the opposite side of that wager - that rates won't fall (bank's opportunity cost) while receiving a guarantee that it has the use of your money for years even if rates rise.
If you get a long term, callable CD, you're hoping that rates remain fairly stable. You're assuming the risks that: (a) rates won't fall more than a little (or you'll lose your long term CD), and (b) rates won't rise more than a little (else that little rate premium won't make up for the higher rates (opportunity cost) you could have gotten after a shorter CD matured.
The higher return on the callable CD is primarily to compensate you for assuming the risk that rates will fall and you'll lose your locked-in rate. The risk of being locked in as rates rise is the same for callable and non-callable CDs.
@MikeM- I apologize for that unfortunate phrasing. You are playing the game by a different set of rules, and that works too. What I meant was it's a sucker's game if you are counting on a long-term income stream, because if you choose a 3 year callable MorganChase because it pays slightly more than a non-callable 3-year, and rates go down even a little, that MorganChase is going to be called and your 3-year plan goes poof.
Given these rates, I don't understand why JPMorgan called my CD, but I'm not complaining.
Side note: Does Schwab offer fractional CDs (units of $100 instead of $1000)? I just opened a Schwab account and don't see this product offered.
The interest was deposited into my brokerage account today (call date), so JPM got no free float. Maybe it couldn't put my money to use (lend it out) at a higher rate right now. Who knows? The bank is apparently happy and I'm getting a higher interest rate. Win-win.