Future PenFed CD rates

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friar1610
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Future PenFed CD rates

Post by friar1610 »

Last December as part of a rebalancing I set up a 4 year CD ladder with PenFed (5 yr., 4 yr., 3 yr., 2 yr. maturities). Their rates, particularly for the 5 year issue, were pretty good at that time. I'd really wanted to do a 5 year ladder but didn't have quite enough money to do so. Fast forward and I am now sitting on a bit of cash from a real estate transaction. I'm considering parking some of it until Dec. and then buying a 5 year CD with PenFed to complete the 5 year ladder.

That brings me to my question for those of you who have more history with PenFed than I do - I recall a post last Dec. in which a Boglehead suggested that PenFed has historically bumped up their CD rates toward the end of the calendar year, apparently to take in more cash in anticipation of loans they will make in the new year. Is this really the case? Have they done this for several years? Would you think there is a probability that they will do so this Dec.? I realize there are no guarantees here and that what they've done in the past is no guarantee that they will do it again in the future. But since I haven't been paying much attention to PenFed for the past several years, I'd appreciate the perspective of anyone who has been tracking their interest rates more closely.

Thanks in advance.
Friar1610 | 50-ish/50-ish - a satisficer, not a maximizer
gerrym51
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Re: Future PenFed CD rates

Post by gerrym51 »

CD increases seem to have stalled in general based on what is happening with the 10 year and 30 year bond
jimkinny
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Re: Future PenFed CD rates

Post by jimkinny »

I do not have any idea what future CD rates will be: no one does but you might get a lot of guess.

I do know that through Vanguard brokerages and others you can buy a new issue 10 year CD YTM in the 3.3 range, maybe a secondary CD at 3.4.

Compare that to a 30 year Treasury which as of today is at 3.43.

The PenFed 5 year at 3% was a good deal.

Jim
feh
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Re: Future PenFed CD rates

Post by feh »

jimkinny wrote: The PenFed 5 year at 3% was a good deal.
It sure was. I'm glad I was able to take advantage of it.

At the end of the calendar year we'll likely have some money to invest in short term vehicles. If CD rates don't go up from where they are now, it will probably end up in VMLTX.
Austintatious
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Re: Future PenFed CD rates

Post by Austintatious »

We purchased IRA CD's at PenFed, this past Dec/Jan. I followed the several PenFed CD threads that got pretty busy during that time. More than one who posted mentioned that PenFed has a history of bumping up their rates during those months. You should be able to find those threads, if interested.
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Sheepdog
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Re: Future PenFed CD rates

Post by Sheepdog »

PenFed does not always have new CD rates every Nov-Dec. And when they do, they do not always have higher 5 year rates. For example, they announced higher rates in November 2012 for 4 year and less maturities, but did not change the 5 year and higher. So what will the future rates be?

You may wish to keep http://www.depositaccounts.com link, if you haven't already, where they keep track of the latest CD rates for PenFed and most others.
Unless you try to do something beyond what you have already mastered you will never grow. (Ralph Waldo Emerson)
am
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Re: Future PenFed CD rates

Post by am »

Can someone explain what determines CD rates at a particular bank? Where do banks get funds to pay the interest on CDs? What do banks do with the money they get from investors for cds? Thanks,
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NAVigator
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Re: Future PenFed CD rates

Post by NAVigator »

Using the link provided by Sheepdog here is an interesting account of FenFed 4th quarter CD values;

Total of all cd’s
Quarter Amount
1 ...$5.8 billion
2 ...$5.7 billion
3 ...$5.6 billion
4....$6.5 billion (16% increase from 3rd qtr)
Pentagon Federal CU Fourth Quarter Growth

Jerry
"I was born with nothing and I have most of it left."
Carl53
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Re: Future PenFed CD rates

Post by Carl53 »

NAVigator wrote:Using the link provided by Sheepdog here is an interesting account of FenFed 4th quarter CD values;

Total of all cd’s
Quarter Amount
1 ...$5.8 billion
2 ...$5.7 billion
3 ...$5.6 billion
4....$6.5 billion (16% increase from 3rd qtr)
Pentagon Federal CU Fourth Quarter Growth

Jerry
The 5300 report for 4th qtr PenFed shows $6.5 billion in non-IRA CDs comprised of $2.06 billion <1 yr, $2.64 1-3 yr, and $1.87 billion 3+ yr. The link and the $6.5 billion quoted do not include IRA CDs. The 5300 report does not breakout < 1yr IRA CDs from IRA shares, but there were $1.29 billion IRA/Keogh shares/CDs in this category. Also, $0.62 billion in 1-3 yr IRA CDs and $0.59 billion in 3+ yr IRA CDs. The IRAs total $2.49 billion.

Checking the 1st quarter for this year:
non-IRA <1 yr $1.95 billion, non-IRA 1-3 yr $2.41 billion, non-IRA 3+yr $2.72 billion for a non-IRA CD total of $7.08 billion, nearly a 10% bump for the quarter. About 7% of the less than 3 year non-IRA CDs were reinvested at longer terms.
IRAKeough <1 yr $0.78 billion, IRA CDs 1-3 yr $0.63 billion, IRA CDs 3+yr $1.14 billion for a IRA CD/share total of $2.56 billion, roughly a 3% bump for the quarter. Apparently, PF achieved $0.5 billion from short term IRAs to new long term CDs but only picked up a little new money.

Quite frankly I'm a little surprised that the IRA long term CDs were not larger in conversions or in new money given PF's liberal redemption privileges.
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dm200
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Re: Future PenFed CD rates

Post by dm200 »

am wrote:Can someone explain what determines CD rates at a particular bank? Where do banks get funds to pay the interest on CDs? What do banks do with the money they get from investors for cds? Thanks,
CDs at banks or the nearly identical certificates at credit unions are one type of the many types of account deposits held by banks and credit unions. Other types of account deposits are checking accounts, regular savings (once called passbook savings), money market savings accounts - and, possibly, a few others.

Banks and credit unions use these funds to provide all sorts of loans to customers and members. They also may choose to invest funds in variou types of investments, such as treasury securities, federal agency bonds, and so forth. The funds earned on loans, investments - as well as various fees, charges and other types of income to the bank or credit union are used to pay interest/dividends on these deposits accounts. Each bank or credit union sets the rates on the various types of accounts, including certificates/CDs, based on its needs for funds, risk and liquidity, competetion - as well as its business model and projections for the future.

A very significant factor to all banks and credit unions in setting interest/dividend rates on deposits is the overall interest rate environment in the economy, as well as future expectations of rates.
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