2-year CDs at Vanguard and Fidelity Today

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stlutz
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by stlutz » Mon Apr 09, 2018 10:47 am

I believe Alliant Credit Union also does not require funds from a maturing CD to go to a new CD by default.

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Kevin M
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Kevin M » Mon Apr 09, 2018 11:23 am

Here's what I'm seeing as of now for quantities available of best 2-year (2.60%) and 3-year (2.80%) CDs at Vanguard and Fidelity.

Vanguard

Morgan Stanley Bank, National Association: 3,151 2-year, 9,293 3-year
Morgan Stanley Private Bank NA: 10,698 2-year, no 3-year

Fidelity

Morgan Stanley Private Bank: 4,277 2-year, no 3-year

So no 3-year 2.80% at Fidelity.

These settle on Thursday, 4/12, and I believe the offerings close two trading days before settlement, so that would be tomorrow. Typically what has happened is that when the offering closes, the bank comes out with another offering that settles one week after the current settlement date.

The closest competition is 2.55% for 2-year and 2.75% for 3-year, both from Ally (brokered of course--their direct rates are much lower). Given that there has been no competition at the 2.60% 2-year and 2.80% 3-year rates, I wonder if Morgan Stanley will continue to offer this rate.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Kevin M » Mon Apr 09, 2018 11:43 am

There is MORGAN STANLEY BK N A UTAH CD 2.60000% 04/06/2020 on secondary at 99.800 or 99.900 after commission, which comes to about 2.65% after commission, but minimum quantity is 25. I just bought 25.

Edit: At Fidelity.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Kevin M » Mon Apr 09, 2018 1:03 pm

At Vanguard there is a 3-year, SALLIE MAE BANK SALT LAKE CITY UT CD FDIC #58177 2.75% 04/12/21 04/11/18, at 99.55, which is 99.65 for yield of 2.872% at $1 commission, and 99.75 for yield of 2.837% at $2 commission, so a pretty good one if you want to go to three years (I just bought a few in several different accounts). One nice thing about this one is that minimum quantity is 1, so good for smaller accounts. Minimum quantity for new issues typically is 10 (it is now anyway).

Also, the Morgan Stanley 2.60% 2-year and 2.80% 3-year were gone at Vanguard a few minutes ago (did some of you jump on them?), but Goldman Sachs Bank had come out with same new issue yields (a few hundred only though), so good to see a little competition at these yields. Now there are more of the Morgan Stanley 2-year at 2.60% and 3-year at 2.80% (only 1000 of the latter), and still some Goldman Sachs at these yields.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by bayview » Mon Apr 09, 2018 4:32 pm

Kevin M wrote:
Mon Apr 09, 2018 1:03 pm
At Vanguard there is a 3-year, SALLIE MAE BANK SALT LAKE CITY UT CD FDIC #58177 2.75% 04/12/21 04/11/18, at 99.55, which is 99.65 for yield of 2.872% at $1 commission, and 99.75 for yield of 2.837% at $2 commission, so a pretty good one if you want to go to three years (I just bought a few in several different accounts). One nice thing about this one is that minimum quantity is 1, so good for smaller accounts. Minimum quantity for new issues typically is 10 (it is now anyway).

Also, the Morgan Stanley 2.60% 2-year and 2.80% 3-year were gone at Vanguard a few minutes ago (did some of you jump on them?), but Goldman Sachs Bank had come out with same new issue yields (a few hundred only though), so good to see a little competition at these yields. Now there are more of the Morgan Stanley 2-year at 2.60% and 3-year at 2.80% (only 1000 of the latter), and still some Goldman Sachs at these yields.

Kevin
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by birdsong » Mon Apr 09, 2018 8:23 pm

I got some of the 3 yr. Morgan Stanley 2.80% at Vanguard that settled last week. You helped me last week decide what to do with some of Dad's extra funds and I bought some of the same in my own Vanguard account.
I'm pleased with the rate and it was easy to do on line. Thanks.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by reimann » Mon Apr 09, 2018 9:13 pm

Thank you for this interesting discussion. I've learned a lot. I think I may purchase some CDs in addition to an intermediate bond fund for the fixed income part of my portfolio.

Reimann

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Kevin M » Tue Apr 10, 2018 11:53 am

Well, the trend of increasing 2-year and 3-year CD rates has resumed. Morgan Stanley Bank now is offering new-issue 2-year at 2.65% and 3-year at 2.85%, available at both Fidelity and Vanguard. These settle 4/19, so now I'll require that any secondary CD rates beat these rates (I already have gotten these rates or better on secondary market), and will be checking for those for the next week or so.

Wells Fargo as joined the 2.60% 2-year club, available at both F and VG, and Goldman Sachs still has 2-year offering at this rate at Fidelity.

Interestingly, at Vanguard still has some of the MS new-issue 2-year available at 2.60% settling 4/6.

At Fidelity, there now are four banks offering 3-year at 2.80%.

Gotta go now, but will update this latter when have a chance to look in more detail.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by indexfundfan » Tue Apr 10, 2018 12:30 pm

I'm looking at this from Schwab and in addition to those mentioned, I also noticed Ally 2-year at 2.6% (settles 4/19).
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Kevin M » Tue Apr 10, 2018 1:25 pm

Kevin M wrote:
Mon Apr 09, 2018 1:03 pm
At Vanguard there is a 3-year, SALLIE MAE BANK SALT LAKE CITY UT CD FDIC #58177 2.75% 04/12/21 04/11/18, at 99.55, which is 99.65 for yield of 2.872% at $1 commission, and 99.75 for yield of 2.837% at $2 commission, so a pretty good one if you want to go to three years (I just bought a few in several different accounts). One nice thing about this one is that minimum quantity is 1, so good for smaller accounts. Minimum quantity for new issues typically is 10 (it is now anyway).
Price on this one is now 99.423 at Fidelity and 99.425 at Vanguard. At Fidelity that's 99.523/2.917% after $1 commission. So almost 7 bps higher than the MS new issue 3-year at 2.85%, and minimum quantity still is 1. At Vanguard with $2 commission it's 99.625/2.881%, so still about 3 bps higher than best new issue yield.

Don't see any 2-year secondary at Fidelity or Vanguard, yet, that beat the 2-year new issue at 2.65% after commission.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by jjunk » Tue Apr 10, 2018 3:05 pm

Question for the experts. I have my 401k and RIRAs all sitting in FSITX (Fidelity Total Intermediate Bond). It currently has a 30d yield of 2.96% and a duration of close to six years. I was thinking about moving all of it into 2yr/3yr CDs. I'd lose ~30bps across the transaction but lower my duration in half as well. Is this a dumb idea?

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by sport » Tue Apr 10, 2018 3:13 pm

jjunk wrote:
Tue Apr 10, 2018 3:05 pm
Question for the experts. I have my 401k and RIRAs all sitting in FSITX (Fidelity Total Intermediate Bond). It currently has a 30d yield of 2.96% and a duration of close to six years. I was thinking about moving all of it into 2yr/3yr CDs. I'd lose ~30bps across the transaction but lower my duration in half as well. Is this a dumb idea?
It's not a dumb idea. You would need a crystal ball to know which will work out better. You could put half into CDs and leave the other half in the bond fund to hedge your bet. You could also consider a shorter term bond fund. Lots of choices...

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by jjunk » Tue Apr 10, 2018 3:20 pm

Thanks, I'll have to look into how I'd split it up. I chose FSITX as the 'intermediate' choice when we first built out our three fund portfolio. You're right, I havent really looked into anything else shorter duration in the fund market to see whats there. We recently bought a ladder in our taxable account because we were thinking about early retirement and then changed our minds, which meant I had a lot of cash doing nothing. That caused me to look at rates for the first time in ages, which in turn led to the ladder. I'll cycle most of that as it matures over the next year but this thread had be thinking about risk/duration seeing as rates are rising. I dont really do the market timing thing but this seemed like a good way to get somewhat comparable yields at less risk. As you said, might not work out but it "feels good" to me right now :D

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by invstar » Wed Apr 11, 2018 11:51 am

Kevin - Thanks for this info. Most of us didn't know these options in VG (or Fidelity).
I just checked in VG, is the following a good buy?

CUSIP: 48126XA54
Issue: JP Morgan Chase 48 MO Callable 06/18@100
Maturity Coupon: 03/15/2021 1.750
Price bid: 98.699
Yield to worst bid: 2.658
Yield to maturity bid: 3.044

Is "Yield to maturity" the annual return of 3.044?

Please explain this CD. So I I want to invest $25000 in this CD. What will be my annual interest rate and how much do I need to pay (asking this because the Price bid is 98.699)?

Thanks,
invstar

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Doc » Wed Apr 11, 2018 12:07 pm

invstar wrote:
Wed Apr 11, 2018 11:51 am
Please explain this CD. So I I want to invest $25000 in this CD. What will be my annual interest rate and how much do I need to pay (asking this because the Price bid is 98.699)?
I don't buy CDs so Kevin is going to have to supply the assessment. But I looked at the detail and find two things that make me think "say what".

1) There is a variable coupon

Coupon schedule
  • Date Coupon
    03/15/2017 1.75
    03/15/2019 2.00
    03/15/2020 3.00
    09/15/2020 5.00
2) It has multiple call dates

Call schedule
  • Date Price
    03/15/2018 100.00
    06/15/2018 100.00
    09/15/2018 100.00
    12/15/2018 100.00
    03/15/2019 100.00
    06/15/2019 100.00
    09/15/2019 100.00
    12/15/2019 100.00
So will you be able to "hold to maturity"? It's not necessarily your choice.
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Chuck » Wed Apr 11, 2018 2:22 pm

Doc wrote:
Sun Apr 08, 2018 11:28 am
I don't like the news out of DC so I'm thinking of moving some intermediate corporates to short Treasuries, JIC.
Ironic that when the government does something stupid, you give them more money!

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Doc » Wed Apr 11, 2018 2:29 pm

Chuck wrote:
Wed Apr 11, 2018 2:22 pm
Doc wrote:
Sun Apr 08, 2018 11:28 am
I don't like the news out of DC so I'm thinking of moving some intermediate corporates to short Treasuries, JIC.
Ironic that when the government does something stupid, you give them more money!
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by invstar » Wed Apr 11, 2018 8:41 pm

Thanks Doc. So are secondary CDs not advised?

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by indexfundfan » Wed Apr 11, 2018 9:23 pm

invstar wrote:
Wed Apr 11, 2018 8:41 pm
Thanks Doc. So are secondary CDs not advised?
Secondary CDs are fine and sometimes you can find even better deals compared to new issues. But what you have listed is not a "regular" CD. Regular CDs are not callable and have fixed rates.
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by happenstance » Thu Apr 12, 2018 12:32 am

Kevin M wrote:
Mon Apr 09, 2018 1:03 pm
At Vanguard there is a 3-year, SALLIE MAE BANK SALT LAKE CITY UT CD FDIC #58177 2.75% 04/12/21 04/11/18, at 99.55, which is 99.65 for yield of 2.872% at $1 commission, and 99.75 for yield of 2.837% at $2 commission, so a pretty good one if you want to go to three years (I just bought a few in several different accounts). One nice thing about this one is that minimum quantity is 1, so good for smaller accounts. Minimum quantity for new issues typically is 10 (it is now anyway).

Also, the Morgan Stanley 2.60% 2-year and 2.80% 3-year were gone at Vanguard a few minutes ago (did some of you jump on them?), but Goldman Sachs Bank had come out with same new issue yields (a few hundred only though), so good to see a little competition at these yields. Now there are more of the Morgan Stanley 2-year at 2.60% and 3-year at 2.80% (only 1000 of the latter), and still some Goldman Sachs at these yields.

Kevin
Kevin,

Could you explain the math for the commission? I've been using this Google Sheets formula when looking at secondary CDs (using the numbers quoted above) to calculate the actual yield. But I don't follow how each $1 in commission results in a $0.10 increase in the sale price.

Code: Select all

=YIELD("04/11/2018", "04/12/2021", 0.0275, 99.55, 100, 2)
And thank you for this insightful thread!

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by SpaceCowboy » Thu Apr 12, 2018 12:57 am

happenstance wrote:
Thu Apr 12, 2018 12:32 am
Kevin M wrote:
Mon Apr 09, 2018 1:03 pm
At Vanguard there is a 3-year, SALLIE MAE BANK SALT LAKE CITY UT CD FDIC #58177 2.75% 04/12/21 04/11/18, at 99.55, which is 99.65 for yield of 2.872% at $1 commission, and 99.75 for yield of 2.837% at $2 commission, so a pretty good one if you want to go to three years (I just bought a few in several different accounts). One nice thing about this one is that minimum quantity is 1, so good for smaller accounts. Minimum quantity for new issues typically is 10 (it is now anyway).

Also, the Morgan Stanley 2.60% 2-year and 2.80% 3-year were gone at Vanguard a few minutes ago (did some of you jump on them?), but Goldman Sachs Bank had come out with same new issue yields (a few hundred only though), so good to see a little competition at these yields. Now there are more of the Morgan Stanley 2-year at 2.60% and 3-year at 2.80% (only 1000 of the latter), and still some Goldman Sachs at these yields.

Kevin
Kevin,

Could you explain the math for the commission? I've been using this Google Sheets formula when looking at secondary CDs (using the numbers quoted above) to calculate the actual yield. But I don't follow how each $1 in commission results in a $0.10 increase in the sale price.

Code: Select all

=YIELD("04/11/2018", "04/12/2021", 0.0275, 99.55, 100, 2)
And thank you for this insightful thread!
They charge you $1 commission per CD. Each CD has a par value of $1000. So in your example, if it is quoted at 99.55, you would actually pay $995.50 + $1 = $996.50 for each CD. To account for this, change the price to 99.65 in your formula.
Hope that helps.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Doc » Thu Apr 12, 2018 6:40 am

invstar wrote:
Wed Apr 11, 2018 8:41 pm
Thanks Doc. So are secondary CDs not advised?
I have no familiarity with CDs of any type.

See:
indexfundfan wrote:
Wed Apr 11, 2018 9:23 pm
invstar wrote:
Wed Apr 11, 2018 8:41 pm
Thanks Doc. So are secondary CDs not advised?
Secondary CDs are fine and sometimes you can find even better deals compared to new issues. But what you have listed is not a "regular" CD. Regular CDs are not callable and have fixed rates.
CDs don't fit my needs. I prefer the higher liquidity despite the lower yield of short Treasuries for this part of our portfolio. Others have different needs.
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Kevin M » Thu Apr 12, 2018 11:28 am

invstar wrote:
Wed Apr 11, 2018 11:51 am
Kevin - Thanks for this info. Most of us didn't know these options in VG (or Fidelity).
I just checked in VG, is the following a good buy?

CUSIP: 48126XA54
Issue: JP Morgan Chase 48 MO Callable 06/18@100
Maturity Coupon: 03/15/2021 1.750
Price bid: 98.699
Yield to worst bid: 2.658
Yield to maturity bid: 3.044

Is "Yield to maturity" the annual return of 3.044?

Please explain this CD. So I I want to invest $25000 in this CD. What will be my annual interest rate and how much do I need to pay (asking this because the Price bid is 98.699)?

Thanks,
invstar
This is a strange one, as Doc pointed out. Several more comments.

The prices/yields you are quoting are ask, not bid. If you look carefully at the Vanguard search results screen, you'll see that the bid price/yields are in the row above the ask price/yields, and in this case there are no bids, so you just see a dash for the bids. If you look to the far left, you'll see "Sell" in the first row and "Buy" in the second row, so the ask price/yields are the relevant price/yields when buying.

I haven't been buying any CDs with calls (or stepped coupons), but generally if you buy a callable fixed-income security yield to worst is more relevant than yield to maturity. In this case, yield to worst of 2.658% is much lower than the competitive 3-year CD yields of 2.85% or higher, and the yield you're quoting is before commission, so your net yield would be even lower. Also, since the CD could be called before maturity, the advantage is to the issuer, and you have no similar "put" to be able to put the CD back to the issuer at par if it were beneficial to you. This asymmetry is one reason some people avoid fixed-income securities with calls.

The best deal on a 3-year CD still is SALLIE MAE BK SLT LAKE CITY UT CD 2.75000% 04/12/2021, CUSIP 795450M36, price/yield = 99.475/2.933%, before commission, and 99.575/2.898% after $1 commission, or 99.675/2.863% after $2 commission, so still a smidge better than the best new issue at 2.85% (no commission) even at the $2 commission level. Same price at both Vanguard and Fidelity, although Vanguard displays the yield as 2.934%. The minimum quantity now is 10 (was 1 before today).

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Kevin M » Thu Apr 12, 2018 11:52 am

happenstance wrote:
Thu Apr 12, 2018 12:32 am
Could you explain the math for the commission? I've been using this Google Sheets formula when looking at secondary CDs (using the numbers quoted above) to calculate the actual yield. But I don't follow how each $1 in commission results in a $0.10 increase in the sale price.

Code: Select all

=YIELD("04/11/2018", "04/12/2021", 0.0275, 99.55, 100, 2)
And thank you for this insightful thread!
SpaceCowboy answered your question about how you bump the price by 0.10 or 0.20 depending on commission level at Vanguard, or always 0.10 at Fidelity.

Also note that your calculated yield might differ slightly from what you see at Vanguard or Fidelity (they even differ slightly from each other for same price sometimes). You can add the day_count_convention parameter after the frequency parameter, and change it to 1 or 3, and you might get closer to what Fidelity or Vanguard displays. The default is 0, which is US 30/360 convention, but CDs typically are actual/actual or actual/365, which are parameter values 1 and 3 respectively.

You can see the day count convention used by clicking on the CD, and looking at the bottom-right of the details screen at Vanguard, or the middle-right under Coupon Features at Fidelity. Even after tweaking this, your value sometimes might be slightly off, but since even Vanguard and Fidelity sometimes calculate this slightly differently, so I don't worry about it once I'm within 0.1 or 0.2 basis points.

For the Sallie Mae CD I've mentioned, Vanguard shows Actual/365 and Fidelity shows ACT/365 or ACT/ACT. I can't explain why Fidelity shows both, but they are only slightly different. I just change this parameter (in a cell) to 1 or 3--whichever gets me closer to the displayed yield.

Ah, one more thing is that most CDs pay interest semi-annually, so 2 usually works for frequency, but some CDs pay interest monthly, in which case 4 is the closest you can get for frequency, since that's the highest value allowed (at least in Google Sheets).

Perhaps you're just showing the parameters hard-coded for illustration, but obviously it's more efficient to put these values into cells, then reference the cells in your formula. You can then use one column for the raw quotes and another column for the after-commission quotes, quickly change the values for the parameters as you evaluate different CDs, etc. I have a column for both $1 and $2 commission, since I buy in different accounts at different commission levels (e.g., as agent for family members with less than $500K of Vanguard assets at Vanguard).

You an also develop a formula for settlement date; you have to build in logic to handle weekends for trades placed on Thursday or Friday, and I have a cell that I enter 1 into to add an additional day for holiday weekends.

Of course the other thing you can do is just click through the purchase screens until you get to the one that shows the net (after commission) yield, and I do that if I'm in a hurry (e.g., in a small account where there might be only 1 or 2 CDs available at what looks like a good yield, since these go fast). Then you can cancel if you don't like the net yield.

Kevin
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by feh » Thu Apr 12, 2018 11:58 am

jjunk wrote:
Tue Apr 10, 2018 3:05 pm
Question for the experts. I have my 401k and RIRAs all sitting in FSITX (Fidelity Total Intermediate Bond). It currently has a 30d yield of 2.96% and a duration of close to six years. I was thinking about moving all of it into 2yr/3yr CDs. I'd lose ~30bps across the transaction but lower my duration in half as well. Is this a dumb idea?
Just be aware that the yield curve is not usually as flat as it is today. At some point, for longer time horizons, FSITX will be more attractive.

For this reason, I have the lion's share of our fixed income in intermediate term bond funds.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by jjunk » Thu Apr 12, 2018 2:39 pm

feh wrote:
Thu Apr 12, 2018 11:58 am
jjunk wrote:
Tue Apr 10, 2018 3:05 pm
Question for the experts. I have my 401k and RIRAs all sitting in FSITX (Fidelity Total Intermediate Bond). It currently has a 30d yield of 2.96% and a duration of close to six years. I was thinking about moving all of it into 2yr/3yr CDs. I'd lose ~30bps across the transaction but lower my duration in half as well. Is this a dumb idea?
Just be aware that the yield curve is not usually as flat as it is today. At some point, for longer time horizons, FSITX will be more attractive.

For this reason, I have the lion's share of our fixed income in intermediate term bond funds.
Understood. What I did was in the middle. I sold half of my FSITX position and put 25% into a 2yr CD (2.65%) and 25% into a 3yr CD (2.85%). I'll continue to put money into FSITX via my 401k auto contributions and then look at what the curve looks like in 2-3yrs and either re-roll a CD or move back into FSITX. Shorter term it just seemed like unnecessary risk for 10-20bps, especially at half the duration. Maybe I'm meddling though.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by feh » Thu Apr 12, 2018 2:48 pm

jjunk wrote:
Thu Apr 12, 2018 2:39 pm

Understood. What I did was in the middle. I sold half of my FSITX position and put 25% into a 2yr CD (2.65%) and 25% into a 3yr CD (2.85%). I'll continue to put money into FSITX via my 401k auto contributions and then look at what the curve looks like in 2-3yrs and either re-roll a CD or move back into FSITX. Shorter term it just seemed like unnecessary risk for 10-20bps, especially at half the duration. Maybe I'm meddling though.
It does strike me as market timing, but it's your money. :P

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Kevin M » Thu Apr 12, 2018 4:04 pm

feh wrote:
Thu Apr 12, 2018 2:48 pm
jjunk wrote:
Thu Apr 12, 2018 2:39 pm

Understood. What I did was in the middle. I sold half of my FSITX position and put 25% into a 2yr CD (2.65%) and 25% into a 3yr CD (2.85%). I'll continue to put money into FSITX via my 401k auto contributions and then look at what the curve looks like in 2-3yrs and either re-roll a CD or move back into FSITX. Shorter term it just seemed like unnecessary risk for 10-20bps, especially at half the duration. Maybe I'm meddling though.
It does strike me as market timing, but it's your money. :P
I disagree that it's market timing, but that's just a phrase that people can define differently.

Since late 2010 I've been investing the largest percentage of my fixed income in the fixed-income securities that provided the highest risk-adjusted yields. Selecting highest risk-adjusted yield or expected return is not market timing, but fully consistent with the science of investing.

Of course it was more obvious that CDs were higher risk-adjusted yield when you could get 100-150 basis points over Treasuries of same maturity, especially in direct CDs with low EWPs. Now that you're getting 20-40 bps extra at 2- and 3-year maturities, and in brokered CDs instead of direct CDs, it's not nearly as much of a no-brainer, but to me it still makes sense. Why take the extra term risk of a 5-year Treasury to get about the same yield as a 3-year CD, unless liquidity is more important to you than yield, or you want the potential benefit of a bump in Treasury values when stocks decline (which hasn't been happening lately).

And using steepness of yield curve to decide which segments to focus more on also makes sense to me. It's the strategy employed by Larry Swedroe's firm, and perhaps DFA as well, and probably Vanguard too in their actively managed bond funds. Call it whatever you want, it seems rational to me.

With the fund you take on some credit risk as well as more term risk. Nothing wrong with that if you think the expected return justifies it, or for a number of other perfectly valid reasons like desire for simplicity, lack of choice, relatively low fixed-income allocation, etc. Putting some in the safer assets with higher-risk adjusted yield and some in the higher-risk fixed income with more term risk, perhaps more credit risk, and almost certainly lower risk-adjusted expected return, makes a lot of sense to me. It's what I continue to do, although my bond fund holdings continue to be only about 25% of my fixed income.

Kevin
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by sperry8 » Thu Apr 12, 2018 4:28 pm

Kevin M wrote:
Sun Apr 08, 2018 3:49 pm
tuffy7222 wrote:
Sun Apr 08, 2018 2:48 pm
To you (Morass) CD lovers....Ya Can't beat Ally for the best rates
whether CD's or savings accounts. :happy
Wrong! I love Ally as a hub bank, and occasionally they've come out with a good deal, like the no-penalty 11-month at 1.75%, which at the time was a great deal (down to 1.50% now, so no good at all), but generally neither their savings rates nor CD rates have been very competitive in recent years.

Ally 2-year offering is a raise your rate at CD 2.00%. With the 2-year brokered yield at 2.60%, the raise your rate feature is not very valuable, especially since it only applies to Ally rates. You'd have to have Ally's raise your rate 2-year rate increase from 2.00% to 3.20% after one year to match the 2-year brokered CD at 2.60%. Possible, sure. Likely, I don't think so.

Ally savings rate is only 1.45%, which you now can easily beat in Prime money market at 1.72%, or in a Popular Direct savings account at 2.00%.

Kevin
This is exactly how I feel about Ally. I use it as my hub bank and take advantage of their sometimes good deals (such as the 1.75% APY no penalty CD). Otherwise, little money stays there.

Thanks Kevin for your time and info. You've taught me a lot and this thread is no exception :sharebeer
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by invstar » Fri Apr 13, 2018 2:04 pm

Kevin - I couldn't find it today but how about this one - Morgan Stanley Bank, National Association Secondary2.8% due 4/12/2021 (CUSIP: 61747MT35)
It's showing a yield of 2.87 (after $100 commission for 50 of them and net amount is 49919.18).
Please let me know if this is a good deal.

Thanks,
inv*
Kevin M wrote:
Mon Apr 09, 2018 1:03 pm
At Vanguard there is a 3-year, SALLIE MAE BANK SALT LAKE CITY UT CD FDIC #58177 2.75% 04/12/21 04/11/18, at 99.55, which is 99.65 for yield of 2.872% at $1 commission, and 99.75 for yield of 2.837% at $2 commission, so a pretty good one if you want to go to three years (I just bought a few in several different accounts). One nice thing about this one is that minimum quantity is 1, so good for smaller accounts. Minimum quantity for new issues typically is 10 (it is now anyway).

Also, the Morgan Stanley 2.60% 2-year and 2.80% 3-year were gone at Vanguard a few minutes ago (did some of you jump on them?), but Goldman Sachs Bank had come out with same new issue yields (a few hundred only though), so good to see a little competition at these yields. Now there are more of the Morgan Stanley 2-year at 2.60% and 3-year at 2.80% (only 1000 of the latter), and still some Goldman Sachs at these yields.

Kevin

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Kevin M » Fri Apr 13, 2018 4:50 pm

invstar wrote:
Fri Apr 13, 2018 2:04 pm
Kevin - I couldn't find it today but how about this one - Morgan Stanley Bank, National Association Secondary2.8% due 4/12/2021 (CUSIP: 61747MT35)
It's showing a yield of 2.87 (after $100 commission for 50 of them and net amount is 49919.18).
Please let me know if this is a good deal.

Thanks,
inv*
I see it at Fidelity (although market now closed) at 99.618/2.933%, so 99.718 /2.898% at $1 and 99.818/2.863% at $2 commission (which it sounds like what you're paying), minimum quantity 1. At Vanguard I see it at 99.65/2.923%, so 99.85/2.853% at $2 commission, but minimum quantity is 25. Again, market not open, but according to these quotes 1 bp less yield at VG. This is OK, but only 0.3 bps higher than new issue at 2.85% with $2 commission at Vanguard. I got a little bit better deal on 4/10 at Vanguard at net 2.971%/2.881% at $1/$2 commission.

Today I looked a little beyond two years, and bought two different issues at Vanguard ($1 commission) for slightly higher net yields than the 2-year new issue. I bought 7 maturing 7/28/2020 at 2.760% net and 13 maturing 8/3/20 at 2.754%-2.760% net depending on exactly how you calculate the yield. So a little more than 10 bps over the new issue 2-year at 2.65% for extending maturity about 3.5 months, which is about 35 bps per extra year of maturity.

Kevin
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by invstar » Sat Apr 14, 2018 12:23 pm

Kevin - Thanks. I will continue looking next week. Have a nice weekend..
Kevin M wrote:
Fri Apr 13, 2018 4:50 pm
invstar wrote:
Fri Apr 13, 2018 2:04 pm
Kevin - I couldn't find it today but how about this one - Morgan Stanley Bank, National Association Secondary2.8% due 4/12/2021 (CUSIP: 61747MT35)
It's showing a yield of 2.87 (after $100 commission for 50 of them and net amount is 49919.18).
Please let me know if this is a good deal.

Thanks,
inv*
I see it at Fidelity (although market now closed) at 99.618/2.933%, so 99.718 /2.898% at $1 and 99.818/2.863% at $2 commission (which it sounds like what you're paying), minimum quantity 1. At Vanguard I see it at 99.65/2.923%, so 99.85/2.853% at $2 commission, but minimum quantity is 25. Again, market not open, but according to these quotes 1 bp less yield at VG. This is OK, but only 0.3 bps higher than new issue at 2.85% with $2 commission at Vanguard. I got a little bit better deal on 4/10 at Vanguard at net 2.971%/2.881% at $1/$2 commission.

Today I looked a little beyond two years, and bought two different issues at Vanguard ($1 commission) for slightly higher net yields than the 2-year new issue. I bought 7 maturing 7/28/2020 at 2.760% net and 13 maturing 8/3/20 at 2.754%-2.760% net depending on exactly how you calculate the yield. So a little more than 10 bps over the new issue 2-year at 2.65% for extending maturity about 3.5 months, which is about 35 bps per extra year of maturity.

Kevin

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by gips » Sat Apr 14, 2018 12:43 pm

yesterday purchased 2-year MS cds on vanguard, 2.65%. We do have 5 year+ cds which yield 3% and 4% but I don't see us going out more than 2 years btw now and the end of the year. I will say, it wasn't much fun acquiring and tabulating 1099s.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Mydanyale » Sat Apr 14, 2018 6:01 pm

Kevin M wrote:
Sun Apr 08, 2018 11:23 am
Sandtrap wrote:
Sat Apr 07, 2018 9:47 pm
So If I purchase 500 lots at 1000k face at $1 fee each = total $500 fee?

As a Flagship Select customer, is this free?
j
As Voyager Select ($500K in Vanguard assets), Flagship ($1M), or Flagship Select ($5M) you pay $1 per bond/CD ($1,000 face), but maximum commission is $250 for a single trade regardless of whether you're paying $1 or $2 commission. So in your example commission would be $250.

So with $2 commission, for those with less than $500K in Vanguard assets, per bond/CD price starts dropping once you hit 125 ($125,000 face), and once you hit 250 price is same as for someone paying $1 commission.

https://investor.vanguard.com/investing ... ommissions

Note that CDs and individual bonds aren't counted as Vanguard assets, so don't count in determining your qualification for different status levels.

https://investor.vanguard.com/investing ... s/flagship

See the link about 2/3 down the page titled "*See what Vanguard assets qualify for these services".

Not relevant to you specifically, since you're already Flagship Select, although I guess if you moved too much out of Vanguard bond funds into CDs, for example, your status could be downgraded.

Kevin
Am I reading it correctly online? There is no fee for newly issued CDs, bonds.
There is never a fee for treasuries.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Kevin M » Sat Apr 14, 2018 9:57 pm

Mydanyale wrote:
Sat Apr 14, 2018 6:01 pm
Am I reading it correctly online? There is no fee for newly issued CDs, bonds.
There is never a fee for treasuries.
Yes. No commission for new-issue CDs, and no commission for Treasuries bought at auction or on secondary market. This is true at both Vanguard and Fidelity.

Kevin
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Doc » Sun Apr 15, 2018 9:49 am

Kevin M wrote:
Sat Apr 14, 2018 9:57 pm
Mydanyale wrote:
Sat Apr 14, 2018 6:01 pm
Am I reading it correctly online? There is no fee for newly issued CDs, bonds.
There is never a fee for treasuries.
Yes. No commission for new-issue CDs, and no commission for Treasuries bought at auction or on secondary market. This is true at both Vanguard and Fidelity.

Kevin
For Treasuries, sometimes brokers act as dealers so while there is no commision they are collecting the bid/ask spread. IIRC correctly Fidelity indicates "from our inventory" before you place the order. At Schwab you don't know until you see the fine print in the confirmation. For a recent Vanguard buy there is a note "2. Capacity: As broker only" which implies sometimes they act as dealer (maybe).

In any case you can treat any cost as minimal at many brokers.
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by ofckrupke » Sun Apr 15, 2018 1:05 pm

Doc wrote:
Sun Apr 15, 2018 9:49 am
At Schwab you don't know until you see the fine print in the confirmation.
That's odd. For treasuries my display of issues passing a search/filter at Schwab shows a superscript "1" for those whose best counterparty offer for a particular minimum count is for/from its own dealer inventory - at least, during market hours. Maybe I am viewing a screen used only by bozos though.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Doc » Sun Apr 15, 2018 2:24 pm

ofckrupke wrote:
Sun Apr 15, 2018 1:05 pm
Doc wrote:
Sun Apr 15, 2018 9:49 am
At Schwab you don't know until you see the fine print in the confirmation.
That's odd. For treasuries my display of issues passing a search/filter at Schwab shows a superscript "1" for those whose best counterparty offer for a particular minimum count is for/from its own dealer inventory - at least, during market hours. Maybe I am viewing a screen used only by bozos though.
It's not always from their inventory. I just think you do not know up front where it is going to be filled from. It doesn't matter. You are going to get the best pricing for the number of bonds whether the order is filled on the open market or from their inventory. (They may show you up front but I don't recall any notification. And don't bother to look outside of market hours.)

They are going to make a little from smaller orders. Because they can buy that amount at a lower price because they are going to buy in larger amounts than you or I and are therefore going to get a little better price.

I see the " 1. Denotes this offering is from the Schwab Inventory" as a footnote on the search page but it there is no 1 in the quotes at this hour. Maybe it changes during market hours.
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by ofckrupke » Sun Apr 15, 2018 2:55 pm

Doc wrote:
Sun Apr 15, 2018 2:24 pm
I see the " 1. Denotes this offering is from the Schwab Inventory" as a footnote on the search page but it there is no 1 in the quotes at this hour. Maybe it changes during market hours.
Exactly.

As far as the rest of it goes, it's enough for me that when I've spot-checked a particular treasury issue at Schwab/Vanguard/Fido the buy/sell spread on a contemplated quantity has been about the same for all three - low single digit BP, denominated in YTM. Contrarily when I peeked at Merrill Edge the same-issue spread was like 15 to 20 BP; plainly, one does not want to do any UST buying or selling there.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by indexfundfan » Sun Apr 15, 2018 3:08 pm

I compared a specific treasury on Friday and Schwab's price was the best among the big 3. I will see if I can do a capture and post them tomorrow.
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Doc » Sun Apr 15, 2018 4:52 pm

indexfundfan wrote:
Sun Apr 15, 2018 3:08 pm
I compared a specific treasury on Friday and Schwab's price was the best among the big 3. I will see if I can do a capture and post them tomorrow.
Once you get the quantity up to 25 or 50 the difference goes to basically zero. For onesys or even tensys the difference between the "big 3" can vary. Remember this is no central clearing house for Treasuries and the amount of effort a broker is going to do to get the "best" spread for a small quantity is limited.

Example if an broker has a buy order for 50 and he goes out and buys 100 to fill that order he now has 50 left over that he bought at a good price and can therefore offer a better price for the next 10 order he gets. (Probably doesn't bother with getting a bid but fills the new buy for 10 from his inventory.) So he can fill the 10 order cheaper than the broker who didn't have the earlier orders.

This is all too minimal to worry about on each order you place. If you are going to buy Treasuries just make sure your account is at a "good" broker.
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by indexfundfan » Mon Apr 16, 2018 9:18 am

Here are the quotes for a specific treasury note (912828X21) on 4/16/18 at around 10am. These are captured within one-minute of each other. The quotes come from Fidelity, Schwab and Vanguard. You can see on Schwab, the top quotes have a smaller spread.

Unless you are buying $200k at one shot, the spreads for a minimum of $25k are

Spread at Fidelity 98.256 - 98.185 = 0.071
Spread at Schwab 98.232 - 98.215 = 0.017
Spread at Vanguard 98.261 - 98.183 = 0.078

Image

Image

Image
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Mitchell777 » Mon Apr 16, 2018 9:29 am

What does "private" mean in this case? I'm thinking of purchasing a 2 or 3 yr new issue. I'm old enough to recall private banks and one of them went insolvent in my area. I assume this has a different connotation. - Thank you in advance
61760AKH1
Security type
Certificate of deposit
Issuer
Morgan Stanley Private Bank NA Purchase NY
Maturity
04/20/2020
Coupon
2.650
Debt ranking
Unknown

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Doc » Mon Apr 16, 2018 10:24 am

indexfundfan wrote:
Mon Apr 16, 2018 9:18 am
Here are the quotes for a specific treasury note (912828X21) on 4/16/18 at around 10am.
912828X21 US Treasury 1.5% 04/15/2020

Index fan, do you have a backdoor into my computer?

I bought

9128284C1 US Treasury 2.25% 03/31/2020

just last week. :D
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by indexfundfan » Mon Apr 16, 2018 10:27 am

Doc wrote:
Mon Apr 16, 2018 10:24 am
indexfundfan wrote:
Mon Apr 16, 2018 9:18 am
Here are the quotes for a specific treasury note (912828X21) on 4/16/18 at around 10am.
912828X21 US Treasury 1.5% 04/15/2020

Index fan, do you have a backdoor into my computer?

I bought

9128284C1 US Treasury 2.25% 03/31/2020

just last week. :D
LOL. We are all looking at the 2-years so it has to be one of those if you don't want to pay the accrued interest.

Where did you buy from?

I have conflicting ideas where to buy. Schwab is the cheapest whereas Fidelity has "auto-roll".
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by indexfundfan » Mon Apr 16, 2018 10:41 am

Looking at 9128284C1

ask price at Schwab is $99.762 (min 1, max 800)
ask price at Fidelity is $99.765 (min 500) or $99.781 (min 1)

Schwab has the following note: "Denotes this offering is from the Schwab Inventory".

The difference is not a lot. You save $1.90 for every $10,000 at Schwab.
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by indexfundfan » Mon Apr 16, 2018 10:46 am

Mitchell777 wrote:
Mon Apr 16, 2018 9:29 am
What does "private" mean in this case? I'm thinking of purchasing a 2 or 3 yr new issue. I'm old enough to recall private banks and one of them went insolvent in my area. I assume this has a different connotation. - Thank you in advance
61760AKH1
Security type
Certificate of deposit
Issuer
Morgan Stanley Private Bank NA Purchase NY
Maturity
04/20/2020
Coupon
2.650
Debt ranking
Unknown
A brief search shows that this CD has FDIC insurance.
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Doc » Mon Apr 16, 2018 10:59 am

indexfundfan wrote:
Mon Apr 16, 2018 10:27 am
Doc wrote:
Mon Apr 16, 2018 10:24 am
indexfundfan wrote:
Mon Apr 16, 2018 9:18 am
Here are the quotes for a specific treasury note (912828X21) on 4/16/18 at around 10am.
912828X21 US Treasury 1.5% 04/15/2020

Index fan, do you have a backdoor into my computer?

I bought

9128284C1 US Treasury 2.25% 03/31/2020

just last week. :D
LOL. We are all looking at the 2-years so it has to be one of those if you don't want to pay the accrued interest.

Where did you buy from?

I have conflicting ideas where to buy. Schwab is the cheapest whereas Fidelity has "auto-roll".
I bought it at Vanguard. I paid $0.16 per thousand more than I would have at Schwab. (I didn't check Fidelity.)

I don't care about auto roll because as a rule I don't hold Treasuries to maturity except for T-bills.
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by indexfundfan » Mon Apr 16, 2018 11:07 am

Doc wrote:
Mon Apr 16, 2018 10:59 am
I bought it at Vanguard. I paid $0.16 per thousand more than I would have at Schwab. (I didn't check Fidelity.)

I don't care about auto roll because as a rule I don't hold Treasuries to maturity except for T-bills.
That's interesting. I am curious. Can you disclose your strategy? Do you buy at 2-year and sell when there is a year left, or something else?
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Kevin M » Tue Apr 17, 2018 5:59 pm

Today I did something a little different in looking at my next CD purchase in a Fidelity IRA. I set search criteria for 2y to 2y6m, with minimum yield of 2.70% (since I want at least 2.65% after commission to match or beat best 2-year new issue yield), then I downloaded the results into a spreadsheet (cool feature). There were 33 CDs that met the criteria.

I first added a column to calculate yield myself, to compare to Fidelity's ask yield. The formula for the first row of data is:

=YIELD(today()+2,$F2,$D2/100,$J2,100,2,1)

First row is header row, so first row of data is in row 2.

First parameter is settlement, which is today + 2 days (add 2 more days for trade on Thursday or Friday). Second parameter is maturity, which Fidelity puts in column F. Third parameter is coupon rate--Fidelity puts coupon rate in column D, but it is displayed as 2.706, for example, so must divided by 100 to convert to percent. Fourth parameter is price, in column J. Fifth parameter is redemption price, which always is 100. Sixth parameter is frequency, which usually is 2 due to semi-annual payments, but if CD payments or monthly you can set to 4 to get closer. Last parameter is day count convention--1 usually gets very close to what Fidelity shows, but sometimes 3 works better; one or the other usually gets within 1 basis point.

Next I added a column to compute net yield (after paying $1 per $1,000 face commission), so the formula is almost the same--just add 0.1 to Price:

=YIELD(today()+2,$F2,$D2/100,$J2+0.1,100,2,1)

This formula is in column R.

Copying these formulas to all rows gives me net yield for all CDs.

Then in column S I add a formula to calculate the basis points per year of additional maturity:

=(R3-R$2)/(F3-F$2)*10,000*365

Numerator is difference in net yields between the CD in each row (in this case, row 3) and the CD in the first row of data (row 2). Denominator is the difference in days between maturity dates, keeping the CD in first data row as the reference. Multiply by 10,000 to convert from percent to basis points (100 to convert to percentage points and another 100 to convert to bps), then multiply by 365 to annualize (bps/year).

Net yield for benchmark CD (row 2, first data row) is 2.654%, maturing 4/13/202- so already a smidge higher than new issue at 2.65% and slightly shorter maturity. Next CD was 2.656% maturing 7 days later, which comes to 11 bps per year--not good enough. Scanning down this column, I saw one that was 131 bps per year, which is fantastic, but there was only 1 available, so too small of a quantity to mess around with (quantity is in column O).

The next highest bps/year were two different CDs maturing 6/1/2020 with net yields of 2.726%, which is 7.2 bps for 0.13 extra years of maturity, or 54 bps per year. That far exceeds the 20 bps per year guideline, as well as the 20 bps you get for extending from 2-year new issue at 2.65% to 3-year new-issue at 2.85%. There were 10 of each, but I only wanted 10 today, so I bought 10 of one of these CDs.

This shows why I decided to do this. I know that generally you only get 20 bps by extending from two years to three years in current CD market, but I thought by extending my maturity dates somewhat beyond two years I might find some exceptions, and I did. Sometimes in recent weeks I've been able to get an additional 7 bps premium over new issue 2-year without extending maturity at all, but sometimes not, like today. I think tomorrow I'll extend all the way to three years with this search, but there were no good deals beyond 7/20/2020 at 2.755% net (38 bps/year) as far out as 10/28/2020 today.

Definitely not something most people are going to want to do, especially if not retired, but thought I'd share for those few who might.

Kevin
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