For Those Who Purchased Ally No Penalty CD's in Dec/Jan

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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by MikeG62 » Wed Jun 20, 2018 7:26 am

OP here.

I have finally decided on a strategy for my excess cash. I have begun the process to close my Ally no-penalty CD's (I have nine of them) and move the funds to Fidelity, where I plan to begin purchasing 6-month Treasuries. My intention is to make that investment in roughly six equal monthly purchases over the next six months. The end result come six months from now is I will have Treasuries maturing every month and I plan to reinvest those proceeds in new six month Treasuries going forward (until and unless more attractive yielding options surface for that excess cash). In the meantime, those funds will sit in Fidelity's MM fund (FZDXX), which is sporting a current 7 day yield of 1.93%. The TEY on the six month Treasuries for me (based upon the most recent auction this week) is 2.25%.
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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by Blueskies123 » Wed Jun 20, 2018 8:32 am

MikeG62 wrote:
Wed Jun 20, 2018 7:26 am
OP here.

I have finally decided on a strategy for my excess cash. I have begun the process to close my Ally no-penalty CD's (I have nine of them) and move the funds to Fidelity, where I plan to begin purchasing 6-month Treasuries. My intention is to make that investment in roughly six equal monthly purchases over the next six months. The end result come six months from now is I will have Treasuries maturing every month and I plan to reinvest those proceeds in new six month Treasuries going forward (until and unless more attractive yielding options surface for that excess cash). In the meantime, those funds will sit in Fidelity's MM fund (FZDXX), which is sporting a current 7 day yield of 1.93%. The TEY on the six month Treasuries for me (based upon the most recent auction this week) is 2.25%.
I am doing the exact same strategy. It took me a long time to find FZDXX. A few years back it was really easy to search for money market funds using Fido, but now the information is hidden away. I do not see a way to buy VMMXX through Fidelity, it says it is an advisor fund and not available to trade on Fido. I am using FZDXX but it bothers me a little that so much of the fund is in commercial paper. Since I worked in finance I know that commercial paper was a problem for a very short time period in 2008. Unfortunately I do not see a way to invest in VMMXX thru Fido nor do I see a Fido fund with an equivalent VMMXX yield with little commercial paper.

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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by aj76er » Wed Jun 20, 2018 9:34 am

I closed my Ally no penalty CDs a few weeks ago and bought 3mo T-bills at auction.

For me, the state tax benefit made it worth it.
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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by MikeG62 » Wed Jun 20, 2018 12:42 pm

Blueskies123 wrote:
Wed Jun 20, 2018 8:32 am
MikeG62 wrote:
Wed Jun 20, 2018 7:26 am
OP here.

I have finally decided on a strategy for my excess cash. I have begun the process to close my Ally no-penalty CD's (I have nine of them) and move the funds to Fidelity, where I plan to begin purchasing 6-month Treasuries. My intention is to make that investment in roughly six equal monthly purchases over the next six months. The end result come six months from now is I will have Treasuries maturing every month and I plan to reinvest those proceeds in new six month Treasuries going forward (until and unless more attractive yielding options surface for that excess cash). In the meantime, those funds will sit in Fidelity's MM fund (FZDXX), which is sporting a current 7 day yield of 1.93%. The TEY on the six month Treasuries for me (based upon the most recent auction this week) is 2.25%.
I am doing the exact same strategy. It took me a long time to find FZDXX. A few years back it was really easy to search for money market funds using Fido, but now the information is hidden away. I do not see a way to buy VMMXX through Fidelity, it says it is an advisor fund and not available to trade on Fido. I am using FZDXX but it bothers me a little that so much of the fund is in commercial paper. Since I worked in finance I know that commercial paper was a problem for a very short time period in 2008. Unfortunately I do not see a way to invest in VMMXX thru Fido nor do I see a Fido fund with an equivalent VMMXX yield with little commercial paper.
I understand this risk and like you lived through 2008 with investments in commercial paper (and even auction rate securities, which took me months to unwind). However, there were indicators which unfolded over the course of that year before things got really scary. We just did not know enough at the time, never having been through anything like 2008 before, to be concerned about them. Long way of saying that we should see indicators we might want to move away from MM funds investing in commercial paper far enough in advance to get our money out should there be a repeat of 2008 (or some other event which has a similar impact).

Edited to add:

At the current time, Yankee/Foreign CD's comprise over 40% of the assets in VMMXX. Perhaps this is where Vanguard is picking up and passing through some extra yield? I am not familiar with these CD's, but there have been some threads here which talk to them. Suffice to say, they are not completely without any risk in times of stress - perhaps no different than the risk that might exist with high grade commercial paper held by FDZXX.
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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by scorp_pccorp » Thu Jun 21, 2018 10:55 am

aj76er wrote:
Wed Jun 20, 2018 9:34 am
I closed my Ally no penalty CDs a few weeks ago and bought 3mo T-bills at auction.

For me, the state tax benefit made it worth it.
Hi, could you please explain what the procedure is for doing this? I am newb to this. Thanks.

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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by MikeG62 » Thu Jun 21, 2018 11:07 am

scorp_pccorp wrote:
Thu Jun 21, 2018 10:55 am
aj76er wrote:
Wed Jun 20, 2018 9:34 am
I closed my Ally no penalty CDs a few weeks ago and bought 3mo T-bills at auction.

For me, the state tax benefit made it worth it.
Hi, could you please explain what the procedure is for doing this? I am newb to this. Thanks.
The procedure for closing your no-penalty Ally CD or the procedure for purchasing Treasury bonds?
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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by scorp_pccorp » Thu Jun 21, 2018 2:11 pm

Procedure for purchasing Treasury bonds at auction?

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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by MikeG62 » Thu Jun 21, 2018 2:39 pm

scorp_pccorp wrote:
Thu Jun 21, 2018 2:11 pm
Procedure for purchasing Treasury bonds at auction?
As per my post above, I am embarking on this process myself. Today I placed an order for 75 six-month Treasury bonds through Fidelity. This auction was announced today, the auction itself is Monday (the 25th) and settlement date is next Thursday the 28th. Keep in mind that 1 Treasury Bond is $1,000 face value. So I placed an order for $75,000 of bonds.

Doing it through Fidelity is easy. Log in and go to Investment Products/Fixed Income, Bonds & CDs/Individual Bonds/US Treasury Bonds/Find US Treasury Bonds/New Issues/Treasuries and select the bond you want to bid on. I selected the 6-month Treasury maturing on 12/27/18 (second one down the list).

Does this help?

As I said above, I plan to buy more six-month treasuries, once each month for the next six months. After that I will have one bond maturing each month going forward and will likely reinvest the proceeds in another new issue 6-month Treasury or redeploy the cash elsewhere.
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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by aj76er » Fri Jun 22, 2018 9:19 am

MikeG62 wrote:
Thu Jun 21, 2018 11:07 am
scorp_pccorp wrote:
Thu Jun 21, 2018 10:55 am
aj76er wrote:
Wed Jun 20, 2018 9:34 am
I closed my Ally no penalty CDs a few weeks ago and bought 3mo T-bills at auction.

For me, the state tax benefit made it worth it.
Hi, could you please explain what the procedure is for doing this? I am newb to this. Thanks.
The procedure for closing your no-penalty Ally CD or the procedure for purchasing Treasury bonds?
I was new to this as well. Here's a post of me asking some questions and going through the procedure. If you follow the replies to my post, you'll see how to do it.
Some general tips:
1. Fidelity (and probably other brokerages) will show the upcoming issues on the announcement date (sometime around noon). You can place a "buy" order at this time. Your order will show up as a market limit order. Here are upcoming auctions: https://www.treasurydirect.gov/instit/i ... m?upcoming
2. At Fidelity, you can only buy in lots of 10, so for a T-bill, you can buy in $1000 increments. So, if you want $40k worth of bonds, you'll need to enter "40" as your order. This is explained pretty well on the order screen.
3. On the order screen (near the bottom), there is a check-box that allows you to auto-roll your bonds on maturity.
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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by Ren » Fri Jun 22, 2018 9:31 am

Just a FYI to people with the 1.75% No-Penalty CD's. It looks like Ally raised the rate to 1.8% for $25k+. I'm going to close and re-open the few that I have over there.

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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by Kevin M » Fri Jun 22, 2018 1:13 pm

aj76er wrote:
Fri Jun 22, 2018 9:19 am
2. At Fidelity, you can only buy in lots of 10, so for a T-bill, you can buy in $1000 increments. So, if you want $40k worth of bonds, you'll need to enter "40" as your order. This is explained pretty well on the order screen.
I think this is partially incorrect. As far as I can tell, you can buy minimum quantity of 1 at auction, so I think "only in lots of 10" is incorrect. You could buy 1 ($1,000 face value) or 12 ($12,000 face value), for example. At least I can get to the preview screen with a quantity of 1. In my experience, you won't be shown the preview screen unless the order can be filled.

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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by ze233 » Fri Jun 29, 2018 9:37 am

Ren wrote:
Fri Jun 22, 2018 9:31 am
Just a FYI to people with the 1.75% No-Penalty CD's. It looks like Ally raised the rate to 1.8% for $25k+. I'm going to close and re-open the few that I have over there.
The no penalty CD is now up to 1.85% for $25k+. I am closing my 1.75% from December and re-opening at this rate.
Also, the regular Ally Online Savings is now up to 1.75%, so it's a no brainer to pull the money out from December back into the Online Savings.

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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by Darth Xanadu » Fri Jun 29, 2018 10:08 am

ze233 wrote:
Fri Jun 29, 2018 9:37 am
Ren wrote:
Fri Jun 22, 2018 9:31 am
Just a FYI to people with the 1.75% No-Penalty CD's. It looks like Ally raised the rate to 1.8% for $25k+. I'm going to close and re-open the few that I have over there.
The no penalty CD is now up to 1.85% for $25k+. I am closing my 1.75% from December and re-opening at this rate.
Also, the regular Ally Online Savings is now up to 1.75%, so it's a no brainer to pull the money out from December back into the Online Savings.
Thanks for the update. Interestingly, their CDs of 1 year and less were slashed by up to 50%. Seems strange? :confused
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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by nwffdiver » Fri Jul 13, 2018 3:07 pm

Yes I just closed a 6 month CD with them earlier this week as the rate( 1.6) was less than my online savings at 1.75?!?!?

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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by brennok » Fri Aug 03, 2018 6:10 pm

Up to 2% now for 25k.

Savings is 1.8%

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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by MikeG62 » Sat Aug 04, 2018 7:29 am

brennok wrote:
Fri Aug 03, 2018 6:10 pm
Up to 2% now for 25k.
Ally's slow pace of reacting to Fed rate hikes is not serving them well. Had they increased this rate to 2.0% back in June I would like not have moved 95% of my cash from Ally to Fidelity's Premium Class MM.

If their goal it to maintain or increase funds on deposit they need to be more nimble and not allow themselves to become uncompetitive for a period of time.
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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by brennok » Sat Aug 04, 2018 10:56 am

MikeG62 wrote:
Sat Aug 04, 2018 7:29 am
brennok wrote:
Fri Aug 03, 2018 6:10 pm
Up to 2% now for 25k.
Ally's slow pace of reacting to Fed rate hikes is not serving them well. Had they increased this rate to 2.0% back in June I would like not have moved 95% of my cash from Ally to Fidelity's Premium Class MM.

If their goal it to maintain or increase funds on deposit they need to be more nimble and not allow themselves to become uncompetitive for a period of time.
It may not be. They may be ok with losing rate chasers. It wouldn't be the first time a competitive bank has slowed down on how quickly it tries to keep up with what else is out there.

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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by MikeG62 » Sat Aug 04, 2018 4:10 pm

brennok wrote:
Sat Aug 04, 2018 10:56 am
MikeG62 wrote:
Sat Aug 04, 2018 7:29 am
brennok wrote:
Fri Aug 03, 2018 6:10 pm
Up to 2% now for 25k.
Ally's slow pace of reacting to Fed rate hikes is not serving them well. Had they increased this rate to 2.0% back in June I would like not have moved 95% of my cash from Ally to Fidelity's Premium Class MM.

If their goal it to maintain or increase funds on deposit they need to be more nimble and not allow themselves to become uncompetitive for a period of time.
It may not be. They may be ok with losing rate chasers. It wouldn't be the first time a competitive bank has slowed down on how quickly it tries to keep up with what else is out there.
I have been an Ally customer since 2008. So no rate chaser here. But when they consistently are late to the game and allow themselves to be uncompetitive for months at a time they put even long-term customers at risk.

This thread is littered with comments from other customers who have done the same thing as me.
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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by brennok » Sat Aug 04, 2018 4:22 pm

MikeG62 wrote:
Sat Aug 04, 2018 4:10 pm
brennok wrote:
Sat Aug 04, 2018 10:56 am
MikeG62 wrote:
Sat Aug 04, 2018 7:29 am
brennok wrote:
Fri Aug 03, 2018 6:10 pm
Up to 2% now for 25k.
Ally's slow pace of reacting to Fed rate hikes is not serving them well. Had they increased this rate to 2.0% back in June I would like not have moved 95% of my cash from Ally to Fidelity's Premium Class MM.

If their goal it to maintain or increase funds on deposit they need to be more nimble and not allow themselves to become uncompetitive for a period of time.
It may not be. They may be ok with losing rate chasers. It wouldn't be the first time a competitive bank has slowed down on how quickly it tries to keep up with what else is out there.
I have been an Ally customer since 2008. So no rate chaser here. But when they consistently are late to the game and allow themselves to be uncompetitive for months at a time they put even long-term customers at risk.

This thread is littered with comments from other customers who have done the same thing as me.
And? It happens to all online banks. They tend to do it when too much money is coming in and they aren't loaning enough out. See INGDirect, SmartyPig, EmigrantDirect, UFBDirect, AmboyDirect, Clearsky, etc. They all were competitive until they weren't because too much money was coming in and not enough going out.

The old Fatwallet forums were littered with threads about banks who were competitive and fell out of favor with long-term customers.

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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by HockeyFan99 » Fri Aug 10, 2018 8:17 pm

I wanted to pile on to this thread since I opened a pair of the Ally no penalty CDs back in early January (one at 1.75% and one at 1.6%) and just rolled them over into the current Ally no penalty CDs (both 2%).

After crunching the numbers between various options, including several of the high yield online MMA / savings account, and VMSXX, VMMXX and VMFXX, this seemed like the best option.

It wasn't, strictly speaking, the highest yield - VMMXX is probably *slightly* higher for me - but given the convenience, predictability (no random end of month or end of quarter rate spikes) and FDIC insurance, it seemed like it remains a pretty good option for liquidity purposes.

I also have to say that I wonder, at times, why I spend so much time evaluating all of these various options for an annual savings that, after tax (and, yes, I know that some of these don't require you to pay federal and/or state tax, but I convert everything to equivalent tax effective yield for comparison purposes) might net me a movie ticket per month (but definitely not a 3D movie ticket!), but I suppose it's about the process as much as it is the results.
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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by jst » Tue Nov 13, 2018 7:14 pm

Up to 2.2% now, so start your closures and reopenings!

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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by brennok » Tue Nov 13, 2018 9:03 pm

Opened again at 2.1 on the 4th so should make the 10 day cutoff.

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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by jst » Tue Nov 13, 2018 9:04 pm

brennok wrote:
Tue Nov 13, 2018 9:03 pm
Opened again at 2.1 on the 4th so should make the 10 day cutoff.
I haven't ever taken advantage of that feature. Is it automatic, or do you have to ask for it?

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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by brennok » Tue Nov 13, 2018 9:30 pm

It should be automatic. I believe if you are still under the 10 day guarantee you will have an indicator next to the rate that pops up the message about the 10 day rule.

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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by nalor511 » Tue Nov 13, 2018 9:34 pm

jst wrote:
Tue Nov 13, 2018 9:04 pm
brennok wrote:
Tue Nov 13, 2018 9:03 pm
Opened again at 2.1 on the 4th so should make the 10 day cutoff.
I haven't ever taken advantage of that feature. Is it automatic, or do you have to ask for it?
Mine wasn't automatic, I had to chat and call 4 times over 2 months to get it implemented. What a waste of time.

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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by Blues » Tue Nov 13, 2018 9:59 pm

I've always automatically received the higher rate if it went up during the 10 day period.
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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by Kevin M » Wed Nov 14, 2018 1:22 pm

Yeah, I too have always received the higher rate automatically, including for one of the NP CDs I opened recently at 2.1% (now showing 2.2%). You don't see the higher rate until day 10 or 11.

It takes about five minutes to do an early withdrawal from an NP CD and reinvest in another one, so if for whatever reason you don't get the rate bump, just do that. I did that with one of the two NP CDs I opened recently before even thinking about the 10-day rate guarantee, but I added some more cash to it too. I'll be doing the same with my other one as soon as the 7-day lockup period has passed on the first one (want to maintain some liquidity with these CDs), and adding even more additional cash to it.

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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by indexonlyplease » Sat Nov 17, 2018 7:04 am

Kevin M wrote:
Wed Nov 14, 2018 1:22 pm
Yeah, I too have always received the higher rate automatically, including for one of the NP CDs I opened recently at 2.1% (now showing 2.2%). You don't see the higher rate until day 10 or 11.

It takes about five minutes to do an early withdrawal from an NP CD and reinvest in another one, so if for whatever reason you don't get the rate bump, just do that. I did that with one of the two NP CDs I opened recently before even thinking about the 10-day rate guarantee, but I added some more cash to it too. I'll be doing the same with my other one as soon as the 7-day lockup period has passed on the first one (want to maintain some liquidity with these CDs), and adding even more additional cash to it.

Kevin
Hi Kevin, question. I purchased a 5 year ally cd last year a 2.25% and now at 3.1%. With rates still increasing should I just cash sell the cd and put it into a no penalty? If I purchas the 3.1% and it goes up again I would have to cash out again? Just asking what is the best strategy. I do have 2 no penalty cds that I plan to sell and purchase the higher rate today. Yes, the calculator states sell.

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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by MikeG62 » Sat Nov 17, 2018 7:18 am

indexonlyplease wrote:
Sat Nov 17, 2018 7:04 am
Kevin M wrote:
Wed Nov 14, 2018 1:22 pm
Yeah, I too have always received the higher rate automatically, including for one of the NP CDs I opened recently at 2.1% (now showing 2.2%). You don't see the higher rate until day 10 or 11.

It takes about five minutes to do an early withdrawal from an NP CD and reinvest in another one, so if for whatever reason you don't get the rate bump, just do that. I did that with one of the two NP CDs I opened recently before even thinking about the 10-day rate guarantee, but I added some more cash to it too. I'll be doing the same with my other one as soon as the 7-day lockup period has passed on the first one (want to maintain some liquidity with these CDs), and adding even more additional cash to it.

Kevin
Hi Kevin, question. I purchased a 5 year ally cd last year a 2.25% and now at 3.1%. With rates still increasing should I just cash sell the cd and put it into a no penalty? If I purchas the 3.1% and it goes up again I would have to cash out again? Just asking what is the best strategy. I do have 2 no penalty cds that I plan to sell and purchase the higher rate today. Yes, the calculator states sell.
The calculator would not "state to sell" if your plan is to liquidate the 5 year CD and reinvest the proceeds in a no-penalty CD. The new investment must yield more than the current CD (you intend to break) - enough so to more than cover the breakage fee - for this to make sense. It probably says yes if you assume reinvestment back into a new 5 year CD at 3.10%.

If you want less term risk, consider buying a one of two year Treasury. At the last auction, one year Treasury yields were almost 2.75% and two year Treasuries were almost 2.90%. Remember, Treasuries are state income tax free. So if you live in a state with a state income tax, your tax equivalent yield will be north of these figures (e.g., a 5% state income tax rate would add roughly 15bps to the tax equivalent yield of those investments).
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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by HAWK23 » Sat Nov 17, 2018 7:56 am

For those of you with the Ally No Penalty CDS - is there a minimum amount of money you need to put into the CD? Or can you choose any amount you would like?

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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by Blues » Sat Nov 17, 2018 8:28 am

HAWK23 wrote:
Sat Nov 17, 2018 7:56 am
For those of you with the Ally No Penalty CDS - is there a minimum amount of money you need to put into the CD? Or can you choose any amount you would like?
The info is posted right on their site:


https://www.ally.com/bank/no-penalty-cd/
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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by HAWK23 » Sat Nov 17, 2018 8:34 am

Blues wrote:
Sat Nov 17, 2018 8:28 am
HAWK23 wrote:
Sat Nov 17, 2018 7:56 am
For those of you with the Ally No Penalty CDS - is there a minimum amount of money you need to put into the CD? Or can you choose any amount you would like?
The info is posted right on their site:


https://www.ally.com/bank/no-penalty-cd/
Thank you. I apologize, I should have been able to find that myself.

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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by Blues » Sat Nov 17, 2018 8:38 am

HAWK23 wrote:
Sat Nov 17, 2018 8:34 am
Blues wrote:
Sat Nov 17, 2018 8:28 am
HAWK23 wrote:
Sat Nov 17, 2018 7:56 am
For those of you with the Ally No Penalty CDS - is there a minimum amount of money you need to put into the CD? Or can you choose any amount you would like?
The info is posted right on their site:


https://www.ally.com/bank/no-penalty-cd/
Thank you. I apologize, I should have been able to find that myself.
No worries. :beer
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Kevin M
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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by Kevin M » Sat Nov 17, 2018 3:26 pm

indexonlyplease wrote:
Sat Nov 17, 2018 7:04 am
Hi Kevin, question. I purchased a 5 year ally cd last year a 2.25% and now at 3.1%. With rates still increasing should I just cash sell the cd and put it into a no penalty? If I purchas the 3.1% and it goes up again I would have to cash out again? Just asking what is the best strategy. I do have 2 no penalty cds that I plan to sell and purchase the higher rate today. Yes, the calculator states sell.
Ally CD rates aren't very competitive, so I wouldn't even consider the 5-year at 3.1%. A 2-year new-issue brokered CD at Vanguard is 3.10%, so same yield with three years less to maturity.

You can use the DA when to break calculator to verify that you'll come out ahead by breaking the CD at 2.25% and reinvesting in a 2-year CD at 3.10%. Enter 24 months for time remaining until maturity, and 5 months for the early withdrawal penalty. By doing this, you earn more, but reduce your term risk significantly, which I would do if you're concerned about increasing interest rates.

The new-issue 5-year brokered CD yield is 3.55%, which I mainly mention to show how lousy the Ally 5-year rate is. But you can get more than 3.1% by extending maturity beyond two years--just not enough more to justify the extra term risk, IMO.

I wouldn't break the 2.25% CD to buy a NP 2.2% CD, unless you really want to gamble on rates continuing to increase. No one can predict interest rates.

As mentioned upthread, also consider Treasuries if you pay state income tax. At my marginal tax rates of 27% fed and 8% state, the taxable-equivalent yield (TEY) of a 2-year Treasury is about 3.15%, so a bit higher than the CD, and more liquid to boot, so I would go for the Treasury in a taxable account.

Kevin
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bradinsky
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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by bradinsky » Sat Nov 17, 2018 4:36 pm

FWIW - First Federal of Lakewood(Northern Ohio) has 13 month CDs @ 2.75%, yield 2.78%. Because of the uncertainty of interest rates, we purchased 3. Part of our fixed income portfolio, and DW sleeps better at night.

Brad

indexonlyplease
Posts: 1297
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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by indexonlyplease » Sun Nov 18, 2018 8:47 am

Kevin M wrote:
Sat Nov 17, 2018 3:26 pm
indexonlyplease wrote:
Sat Nov 17, 2018 7:04 am
Hi Kevin, question. I purchased a 5 year ally cd last year a 2.25% and now at 3.1%. With rates still increasing should I just cash sell the cd and put it into a no penalty? If I purchas the 3.1% and it goes up again I would have to cash out again? Just asking what is the best strategy. I do have 2 no penalty cds that I plan to sell and purchase the higher rate today. Yes, the calculator states sell.
Ally CD rates aren't very competitive, so I wouldn't even consider the 5-year at 3.1%. A 2-year new-issue brokered CD at Vanguard is 3.10%, so same yield with three years less to maturity.

You can use the DA when to break calculator to verify that you'll come out ahead by breaking the CD at 2.25% and reinvesting in a 2-year CD at 3.10%. Enter 24 months for time remaining until maturity, and 5 months for the early withdrawal penalty. By doing this, you earn more, but reduce your term risk significantly, which I would do if you're concerned about increasing interest rates.

The new-issue 5-year brokered CD yield is 3.55%, which I mainly mention to show how lousy the Ally 5-year rate is. But you can get more than 3.1% by extending maturity beyond two years--just not enough more to justify the extra term risk, IMO.

I wouldn't break the 2.25% CD to buy a NP 2.2% CD, unless you really want to gamble on rates continuing to increase. No one can predict interest rates.

As mentioned upthread, also consider Treasuries if you pay state income tax. At my marginal tax rates of 27% fed and 8% state, the taxable-equivalent yield (TEY) of a 2-year Treasury is about 3.15%, so a bit higher than the CD, and more liquid to boot, so I would go for the Treasury in a taxable account.

Kevin
I will look at the 1-2 year Treasuries. Thanks

indexonlyplease
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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by indexonlyplease » Sun Nov 18, 2018 10:05 am

I have gone to Tresury Direct. Looked up auctions. I see upcoming auctions 13 and 26 week. I did read Treasury Bill go up to 52 weeks and bid every 4 weeks. I don't see what the rate will be. I can only see past rates when I open.

Where do I see the interest rates on upcoming auctions.

flah
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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by flah » Sun Nov 18, 2018 10:13 am

indexonlyplease wrote:
Sun Nov 18, 2018 10:05 am
I have gone to Tresury Direct. Looked up auctions. I see upcoming auctions 13 and 26 week. I did read Treasury Bill go up to 52 weeks and bid every 4 weeks. I don't see what the rate will be. I can only see past rates when I open.

Where do I see the interest rates on upcoming auctions.

"The price of a bill is determined at auction."

https://treasurydirect.gov/indiv/resear ... _rates.htm

indexonlyplease
Posts: 1297
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Location: Florida

Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by indexonlyplease » Sun Nov 18, 2018 10:31 am

flah wrote:
Sun Nov 18, 2018 10:13 am
indexonlyplease wrote:
Sun Nov 18, 2018 10:05 am
I have gone to Tresury Direct. Looked up auctions. I see upcoming auctions 13 and 26 week. I did read Treasury Bill go up to 52 weeks and bid every 4 weeks. I don't see what the rate will be. I can only see past rates when I open.

Where do I see the interest rates on upcoming auctions.

"The price of a bill is determined at auction."

https://treasurydirect.gov/indiv/resear ... _rates.htm
I did see this. Does this mean I have to wait until the day of the acution to see yield and then purchase?

MikeG62
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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by MikeG62 » Sun Nov 18, 2018 11:01 am

indexonlyplease wrote:
Sun Nov 18, 2018 10:31 am
flah wrote:
Sun Nov 18, 2018 10:13 am
indexonlyplease wrote:
Sun Nov 18, 2018 10:05 am
I have gone to Tresury Direct. Looked up auctions. I see upcoming auctions 13 and 26 week. I did read Treasury Bill go up to 52 weeks and bid every 4 weeks. I don't see what the rate will be. I can only see past rates when I open.

Where do I see the interest rates on upcoming auctions.

"The price of a bill is determined at auction."

https://treasurydirect.gov/indiv/resear ... _rates.htm
I did see this. Does this mean I have to wait until the day of the acution to see yield and then purchase?
You won't know the yield until after the auction closes. However, as a non-competitive bidder you are guaranteed to get the same rate as everyone else who bought that issuance at auction (including the institutions who are buying millions of dollars in bonds at a time).

I buy through Fidelity not Treasury Direct. Fidelity shows an estimated yield. I have bought through Fidelity a number of times. Actual yield has always been a few bps higher than their estimate (not saying this will always be the case, just that it has been the case for me). I have no worry about placing an order and not knowing the precise yield.

You can also buy Treasuries in the secondary market from Fidelity (as well as other brokers). This way you will know exactly the yield on the bond before you purchase. You have to search and see what is available. Sometimes the bonds in the secondary market have large minimum purchase quantities. So look around and see what works for you. For example, I bought 70 13-month Treasuries in the secondary market a few weeks ago at a yield of 2.78%. Did not want to wait for the next 12-month auction (which happens only once a month).
Real Knowledge Comes Only From Experience

indexonlyplease
Posts: 1297
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Location: Florida

Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by indexonlyplease » Sun Nov 18, 2018 11:15 am

MikeG62 wrote:
Sun Nov 18, 2018 11:01 am
indexonlyplease wrote:
Sun Nov 18, 2018 10:31 am
flah wrote:
Sun Nov 18, 2018 10:13 am
indexonlyplease wrote:
Sun Nov 18, 2018 10:05 am
I have gone to Tresury Direct. Looked up auctions. I see upcoming auctions 13 and 26 week. I did read Treasury Bill go up to 52 weeks and bid every 4 weeks. I don't see what the rate will be. I can only see past rates when I open.

Where do I see the interest rates on upcoming auctions.

"The price of a bill is determined at auction."

https://treasurydirect.gov/indiv/resear ... _rates.htm
I did see this. Does this mean I have to wait until the day of the acution to see yield and then purchase?
You won't know the yield until after the auction closes. However, as a non-competitive bidder you are guaranteed to get the same rate as everyone else who bought that issuance at auction (including the institutions who are buying millions of dollars in bonds at a time).

I buy through Fidelity not Treasury Direct. Fidelity shows an estimated yield. I have bought through Fidelity a number of times. Actual yield has always been a few bps higher than their estimate (not saying this will always be the case, just that it has been the case for me). I have no worry about placing an order and not knowing the precise yield.

You can also buy Treasuries in the secondary market from Fidelity (as well as other brokers). This way you will know exactly the yield on the bond before you purchase. You have to search and see what is available. Sometimes the bonds in the secondary market have large minimum purchase quantities. So look around and see what works for you. For example, I bought 70 13-month Treasuries in the secondary market a few weeks ago at a yield of 2.78%. Did not want to wait for the next 12-month auction (which happens only once a month).
To confirm, I live in Florida no tax state. So the interest is just federal tax free?
So the 2.78% is really higher if you consider the tax equivalent?
If I break the Tresury I get my money back and zero interest?
I guess it would be better to buy multiple bill instead of one?

tj
Posts: 2238
Joined: Thu Dec 24, 2009 12:10 am

Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by tj » Sun Nov 18, 2018 11:24 am

indexonlyplease wrote:
Sun Nov 18, 2018 11:15 am
MikeG62 wrote:
Sun Nov 18, 2018 11:01 am
indexonlyplease wrote:
Sun Nov 18, 2018 10:31 am
flah wrote:
Sun Nov 18, 2018 10:13 am
indexonlyplease wrote:
Sun Nov 18, 2018 10:05 am
I have gone to Tresury Direct. Looked up auctions. I see upcoming auctions 13 and 26 week. I did read Treasury Bill go up to 52 weeks and bid every 4 weeks. I don't see what the rate will be. I can only see past rates when I open.

Where do I see the interest rates on upcoming auctions.

"The price of a bill is determined at auction."

https://treasurydirect.gov/indiv/resear ... _rates.htm
I did see this. Does this mean I have to wait until the day of the acution to see yield and then purchase?
You won't know the yield until after the auction closes. However, as a non-competitive bidder you are guaranteed to get the same rate as everyone else who bought that issuance at auction (including the institutions who are buying millions of dollars in bonds at a time).

I buy through Fidelity not Treasury Direct. Fidelity shows an estimated yield. I have bought through Fidelity a number of times. Actual yield has always been a few bps higher than their estimate (not saying this will always be the case, just that it has been the case for me). I have no worry about placing an order and not knowing the precise yield.

You can also buy Treasuries in the secondary market from Fidelity (as well as other brokers). This way you will know exactly the yield on the bond before you purchase. You have to search and see what is available. Sometimes the bonds in the secondary market have large minimum purchase quantities. So look around and see what works for you. For example, I bought 70 13-month Treasuries in the secondary market a few weeks ago at a yield of 2.78%. Did not want to wait for the next 12-month auction (which happens only once a month).
To confirm, I live in Florida no tax state. So the interest is just federal tax free?
So the 2.78% is really higher if you consider the tax equivalent?
If I break the Tresury I get my money back and zero interest?
I guess it would be better to buy multiple bill instead of one?
No, treasuries are not federal tax exempt.

MikeG62
Posts: 1219
Joined: Tue Nov 15, 2016 3:20 pm
Location: New Jersey

Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by MikeG62 » Sun Nov 18, 2018 11:53 am

tj wrote:
Sun Nov 18, 2018 11:24 am
indexonlyplease wrote:
Sun Nov 18, 2018 11:15 am
MikeG62 wrote:
Sun Nov 18, 2018 11:01 am
indexonlyplease wrote:
Sun Nov 18, 2018 10:31 am
flah wrote:
Sun Nov 18, 2018 10:13 am



"The price of a bill is determined at auction."

https://treasurydirect.gov/indiv/resear ... _rates.htm
I did see this. Does this mean I have to wait until the day of the acution to see yield and then purchase?
You won't know the yield until after the auction closes. However, as a non-competitive bidder you are guaranteed to get the same rate as everyone else who bought that issuance at auction (including the institutions who are buying millions of dollars in bonds at a time).

I buy through Fidelity not Treasury Direct. Fidelity shows an estimated yield. I have bought through Fidelity a number of times. Actual yield has always been a few bps higher than their estimate (not saying this will always be the case, just that it has been the case for me). I have no worry about placing an order and not knowing the precise yield.

You can also buy Treasuries in the secondary market from Fidelity (as well as other brokers). This way you will know exactly the yield on the bond before you purchase. You have to search and see what is available. Sometimes the bonds in the secondary market have large minimum purchase quantities. So look around and see what works for you. For example, I bought 70 13-month Treasuries in the secondary market a few weeks ago at a yield of 2.78%. Did not want to wait for the next 12-month auction (which happens only once a month).
To confirm, I live in Florida no tax state. So the interest is just federal tax free?
So the 2.78% is really higher if you consider the tax equivalent?
If I break the Tresury I get my money back and zero interest?
I guess it would be better to buy multiple bill instead of one?
No, treasuries are not federal tax exempt.
Indexonlyplease, it's not a CD so there is no way to break a Treasury. If you decide you want to sell prior to maturity you place a sell order with your broker (I use Fidelity) and should get market rates. If you want to hedge your bets, then buy in several installments.

As Tj said, only tax break is state income taxes. For you that is zero.
Real Knowledge Comes Only From Experience

indexonlyplease
Posts: 1297
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Location: Florida

Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by indexonlyplease » Sun Nov 18, 2018 12:11 pm

Thanks everyone, I get it now

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Kevin M
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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by Kevin M » Sun Nov 18, 2018 4:22 pm

indexonlyplease wrote:
Sun Nov 18, 2018 8:47 am
I will look at the 1-2 year Treasuries. Thanks
indexonlyplease wrote:
Sun Nov 18, 2018 10:05 am
I have gone to Tresury Direct. Looked up auctions. I see upcoming auctions 13 and 26 week. I did read Treasury Bill go up to 52 weeks and bid every 4 weeks. I don't see what the rate will be. I can only see past rates when I open.

Where do I see the interest rates on upcoming auctions.
indexonlyplease wrote:
Sun Nov 18, 2018 10:31 am
I did see this. Does this mean I have to wait until the day of the acution to see yield and then purchase?
indexonlyplease wrote:
Sun Nov 18, 2018 11:15 am
To confirm, I live in Florida no tax state. So the interest is just federal tax free?
So the 2.78% is really higher if you consider the tax equivalent?
If I break the Tresury I get my money back and zero interest?
I guess it would be better to buy multiple bill instead of one?
You're already received some good answers to these questions. Here is some more info that may be useful to you.

Since you don't pay state income tax, the quoted Treasury yield is your taxable-equivalent yield (TEY). If you paid state income tax, as I do, the TEY would be higher. The TEY is what you compare to fully-taxable fixed-income, like CDs.

The yield at auction will be quite close to whatever that maturity is yielding on the secondary market just before the auction, unless something big happens that causes the yields to change a lot. Hasn't happened lately. You can see yield summaries at the Vanguard or Fidelity yields overview web pages. Here is a link to the Vanguard page: https://personal.vanguard.com/us/FixedIncomeHome. Here is a link to the Fidelity page: https://fixedincome.fidelity.com/ftgw/fi/FILanding. It's better to look at these when the bond markets are open.

Caveats:
  • The quotes for Treasuries are for large quantities, and the quote shown in the summary page may be for a maturity that is a month or so longer than indicated--they show the highest quote in a range around the indicated maturity. At Vanguard and Fidelity, you will receive a lower yield for smaller quantities (like less than 100 or 200, which is $100K or $200K face value), but at Schwab, you often get the highest yield for a minimum quantity of 10 ($10K face value), so Schwab is the best for buying/selling Treasuries on the secondary market.
  • The CD yields are for new issue CDs, for which you pay no commission at Fidelity or Vanguard (and I assume Schwab too). At Vanguard, the CD quotes are for non-callable CDs, while Fidelity might include callable CDs. You often can get slightly higher yields for CDs on the secondary market, even after commission. However, it's less likely for smaller accounts at Vanguard, where the commission is 0.2%, compared to Fidelity and larger accounts at Vanguard where the commission is 0.1%.
Here's a summary chart of CD and Treasury yields constructed from whatever the Fidelity yields summary page is showing:

Image

The Treasury TEY curve is based on my marginal tax rates of 27% federal and 8% state (although there is no federal tax exemption, the federal marginal tax rate is used in calculating the TEY), so since you don't pay state income tax, you can ignore that curve.

So for you (blue and red curves), you'll get slightly higher yields on Treasuries for maturities of less than one year, especially if you buy at auction, or on secondary market at Schwab. Some if not all of this advantage will be eliminated if you buy smaller quantities at Vanguard or Fidelity, but due to the superior liquidity of Treasuries, I'd still go for a Treasury in this maturity range.

At 1-year maturity, CD and Treasury yields are about equal, but with same caveats already mentioned (which broker and auction vs. secondary for smaller quantities of Treasuries). At 2-year maturity and beyond, CDs have a clear yield advantage, and it increases as maturity increases. So as long as you will hold to maturity, you'll earn more from CDs at 2-year maturity and beyond.

As an aside, you can see that the crossover point for me in a taxable account is at 2-year maturity, so I would favor Treasuries in a taxable account out to at least 2-year maturity, and probably even to 3-year due to the much higher liquidity of Treasuries, but currently I wouldn't go much beyond 2-year maturity due to flatness of yield curve beyond that. I'm even loath to go beyond 1-year maturity in taxable for same reason.

As already mentioned, with a Treasury or brokered CD, you don't "break" it (i.e., do an early withdrawal), as you do with a direct CD. You can sell it on the secondary market. The bid/ask spread for CDs is quite high, and I think you pay a commission when you sell (I never sell brokered CDs, so not sure), so I wouldn't buy a brokered CD unless I planned to hold it to maturity. The bid/ask spread is much smaller for Treasuries, although not quite as much for smaller quantities at Vanguard and Fidelity, but what you'll get is uncertain since it will depend on the relevant yield at the time you sell. You will not get the face value, and you may get more or less than what you paid, or more or less than the original yield.

My preference is to buy multiple securities (Treasuries or CDs) of various maturities--somewhat of a ladder--so that I'm likely to have some maturing when I need or want the cash. I can roll whatever I don't want in cash to a new CD or Treasury (or possibly even a AA/AAA muni in taxable) of whatever maturity looks good to me at the time.

Kevin
Wiki ||.......|| Suggested format for Asking Portfolio Questions (edit original post)

indexonlyplease
Posts: 1297
Joined: Thu Apr 30, 2015 12:30 pm
Location: Florida

Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by indexonlyplease » Mon Nov 19, 2018 5:21 pm

Kevin M wrote:
Sun Nov 18, 2018 4:22 pm
indexonlyplease wrote:
Sun Nov 18, 2018 8:47 am
I will look at the 1-2 year Treasuries. Thanks
indexonlyplease wrote:
Sun Nov 18, 2018 10:05 am
I have gone to Tresury Direct. Looked up auctions. I see upcoming auctions 13 and 26 week. I did read Treasury Bill go up to 52 weeks and bid every 4 weeks. I don't see what the rate will be. I can only see past rates when I open.

Where do I see the interest rates on upcoming auctions.
indexonlyplease wrote:
Sun Nov 18, 2018 10:31 am
I did see this. Does this mean I have to wait until the day of the acution to see yield and then purchase?
indexonlyplease wrote:
Sun Nov 18, 2018 11:15 am
To confirm, I live in Florida no tax state. So the interest is just federal tax free?
So the 2.78% is really higher if you consider the tax equivalent?
If I break the Tresury I get my money back and zero interest?
I guess it would be better to buy multiple bill instead of one?
You're already received some good answers to these questions. Here is some more info that may be useful to you.

Since you don't pay state income tax, the quoted Treasury yield is your taxable-equivalent yield (TEY). If you paid state income tax, as I do, the TEY would be higher. The TEY is what you compare to fully-taxable fixed-income, like CDs.

The yield at auction will be quite close to whatever that maturity is yielding on the secondary market just before the auction, unless something big happens that causes the yields to change a lot. Hasn't happened lately. You can see yield summaries at the Vanguard or Fidelity yields overview web pages. Here is a link to the Vanguard page: https://personal.vanguard.com/us/FixedIncomeHome. Here is a link to the Fidelity page: https://fixedincome.fidelity.com/ftgw/fi/FILanding. It's better to look at these when the bond markets are open.

Caveats:
  • The quotes for Treasuries are for large quantities, and the quote shown in the summary page may be for a maturity that is a month or so longer than indicated--they show the highest quote in a range around the indicated maturity. At Vanguard and Fidelity, you will receive a lower yield for smaller quantities (like less than 100 or 200, which is $100K or $200K face value), but at Schwab, you often get the highest yield for a minimum quantity of 10 ($10K face value), so Schwab is the best for buying/selling Treasuries on the secondary market.
  • The CD yields are for new issue CDs, for which you pay no commission at Fidelity or Vanguard (and I assume Schwab too). At Vanguard, the CD quotes are for non-callable CDs, while Fidelity might include callable CDs. You often can get slightly higher yields for CDs on the secondary market, even after commission. However, it's less likely for smaller accounts at Vanguard, where the commission is 0.2%, compared to Fidelity and larger accounts at Vanguard where the commission is 0.1%.
Here's a summary chart of CD and Treasury yields constructed from whatever the Fidelity yields summary page is showing:

Image

The Treasury TEY curve is based on my marginal tax rates of 27% federal and 8% state (although there is no federal tax exemption, the federal marginal tax rate is used in calculating the TEY), so since you don't pay state income tax, you can ignore that curve.

So for you (blue and red curves), you'll get slightly higher yields on Treasuries for maturities of less than one year, especially if you buy at auction, or on secondary market at Schwab. Some if not all of this advantage will be eliminated if you buy smaller quantities at Vanguard or Fidelity, but due to the superior liquidity of Treasuries, I'd still go for a Treasury in this maturity range.

At 1-year maturity, CD and Treasury yields are about equal, but with same caveats already mentioned (which broker and auction vs. secondary for smaller quantities of Treasuries). At 2-year maturity and beyond, CDs have a clear yield advantage, and it increases as maturity increases. So as long as you will hold to maturity, you'll earn more from CDs at 2-year maturity and beyond.

As an aside, you can see that the crossover point for me in a taxable account is at 2-year maturity, so I would favor Treasuries in a taxable account out to at least 2-year maturity, and probably even to 3-year due to the much higher liquidity of Treasuries, but currently I wouldn't go much beyond 2-year maturity due to flatness of yield curve beyond that. I'm even loath to go beyond 1-year maturity in taxable for same reason.

As already mentioned, with a Treasury or brokered CD, you don't "break" it (i.e., do an early withdrawal), as you do with a direct CD. You can sell it on the secondary market. The bid/ask spread for CDs is quite high, and I think you pay a commission when you sell (I never sell brokered CDs, so not sure), so I wouldn't buy a brokered CD unless I planned to hold it to maturity. The bid/ask spread is much smaller for Treasuries, although not quite as much for smaller quantities at Vanguard and Fidelity, but what you'll get is uncertain since it will depend on the relevant yield at the time you sell. You will not get the face value, and you may get more or less than what you paid, or more or less than the original yield.

My preference is to buy multiple securities (Treasuries or CDs) of various maturities--somewhat of a ladder--so that I'm likely to have some maturing when I need or want the cash. I can roll whatever I don't want in cash to a new CD or Treasury (or possibly even a AA/AAA muni in taxable) of whatever maturity looks good to me at the time.

Kevin
Great information Kevin. Thanks,

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Blues
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Re: For Those Who Purchased Ally No Penalty CD's in Dec/Jan

Post by Blues » Mon Nov 19, 2018 5:46 pm

I know one thing...when Kevin opens up a bond fund...either with Vanguard or elsewhere...I'm getting in on the ground floor.
I don't have the patience or bulldoggedness to dive into the numbers as he does but he provides a tremendous service to this community imho.

Here's to you, Kevin. :sharebeer
“Tactics without strategy is the noise before defeat.” - Sun Tzu | "Everybody has a plan until they get punched in the mouth." - Mike Tyson

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