Why is capital one's 18 month CD paying less than their 12 month CD and so on?

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arcticpineapplecorp.
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Why is capital one's 18 month CD paying less than their 12 month CD and so on?

Post by arcticpineapplecorp. » Wed Jul 11, 2018 9:16 pm

Looking at CD rates and bankrate listed capital one as having some of the highest rates. So I went to their site:

https://www.capitalone.com/cds/online-cds/disclosures/
https://www.capitalone.com/bank/cds/onl ... 11858729_0

And I'm wondering why the 12 month CD is paying 2.2761% while the 18 month CD is paying 1.7361%. I would assume locking up your money for longer would yield more interest, not less. Why would I choose to lock my money up for 18 months to earn less interest than if I lock it up for just 12 months?

Similary, there seems to be no difference in the amount of interest earned between their 24 month and 30 month CD (both 2.4718%). If that's the case, why would I lock my money up for longer if there's no additional benefit to doing so? The only reason I might lock money up for 6 more months to earn the same amount of interest is because I fear the rate will be lower after 12 months so I'd get a few more months at the same higher present rate. But nobody can predict where interest rates are going.

I don't see any other difference in other terms (like different minimums, etc), so I'm not sure why the differences here that aren't making intuitive sense. Can someone explain? Thanks!
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

Streamer
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Re: Why is capital one's 18 month CD paying less than their 12 month CD and so on?

Post by Streamer » Wed Jul 11, 2018 10:38 pm

The yield curve is flattening. Normally this would mean a recession is on the horizon but I believe most top economists aren't sure about what is going to happen.

aristotelian
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Re: Why is capital one's 18 month CD paying less than their 12 month CD and so on?

Post by aristotelian » Thu Jul 12, 2018 12:08 am

Interest rates are increasing. Short term rates are spiking but long term rates haven't caught up. Apparently a lot of money out there thinks that stocks are not a sure thing to return 3%, even over 20 years, so rates for long bonds are still low. I agree, short term rates are appealing right now if you can't get a premium for long term. But maybe short term rates will be going even higher.

mouses
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Re: Why is capital one's 18 month CD paying less than their 12 month CD and so on?

Post by mouses » Thu Jul 12, 2018 11:34 am

Sometimes I see one of the local credit unions in my area have some sort of special where an apparently random term CD has an unusually high interest rate for awhile. I have no idea why this is.

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Pajamas
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Re: Why is capital one's 18 month CD paying less than their 12 month CD and so on?

Post by Pajamas » Thu Jul 12, 2018 11:48 am

Because the future is uncertain.
Bond Traders Now Betting Rate Cut Just as Likely as Hike in 2020

Bond traders are calling time on the Federal Reserve’s tightening cycle.

The spread between December 2019 and December 2020 eurodollar contracts fell below zero Wednesday for the first time, suggesting short-end traders don’t expect the central bank to raise interest rates at all after next year. In fact, they’re giving slightly better odds that the Fed eases policy over the span instead of tightening it.
https://www.bloomberg.com/news/articles ... ke-in-2020

HP-12Cing
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Re: Why is capital one's 18 month CD paying less than their 12 month CD and so on?

Post by HP-12Cing » Thu Jul 12, 2018 11:53 am

mouses wrote:
Thu Jul 12, 2018 11:34 am
Sometimes I see one of the local credit unions in my area have some sort of special where an apparently random term CD has an unusually high interest rate for awhile. I have no idea why this is.
Generally this is a tactic used by community banks for interest rate risk control purposes, such as matching CDs to assets with similar maturities.

Edited to add that it can also simply be a way for the bank to attract deposits by getting a CD to stand out by not having it listed along with a lot of others of the same term.

sport
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Re: Why is capital one's 18 month CD paying less than their 12 month CD and so on?

Post by sport » Thu Jul 12, 2018 12:34 pm

HP-12Cing wrote:
Thu Jul 12, 2018 11:53 am
mouses wrote:
Thu Jul 12, 2018 11:34 am
Sometimes I see one of the local credit unions in my area have some sort of special where an apparently random term CD has an unusually high interest rate for awhile. I have no idea why this is.
Generally this is a tactic used by community banks for interest rate risk control purposes, such as matching CDs to assets with similar maturities.

Edited to add that it can also simply be a way for the bank to attract deposits by getting a CD to stand out by not having it listed along with a lot of others of the same term.
The odd terms also make it more difficult to compare their offer with other banks.

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