2-year CDs at Vanguard and Fidelity Today

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Mitchell777
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Mitchell777 » Tue May 22, 2018 7:40 pm

I see now that it reads "known future coupon rates"
CUSIP
48125YZ98
Security type
Certificate of deposit
Issuer
JP Morgan Chase Bank NA
Maturity
05/20/2021
Coupon
1.250
Debt ranking
Unknown
Security notes

FDIC no.
628
State
OH
Coupon type
Stepped: Known Future Coupon Rates
Next coupon
11/20/2018

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

Post by Kevin M » Wed May 23, 2018 7:35 pm

Mitchell777 wrote:
Tue May 22, 2018 7:40 pm
CUSIP
48125YZ98
Here's what I see when I search for this CUSIP at Vanguard. There are 10 available with minimum quantity 1. Coupon is 1.25%, and ask price is 96.857. Maturity date is 5/20/21, so basically a 3-year CD. Yield to maturity is 3.332% and yield to worst is 3.011%. The fact that YTW is lower than YTM indicates that this bond can be called before maturity, so you should go by YTW. However, you will pay $2/CD commission unless you have $500K or more of Vanguard assets, in which case it is $1/CD. This raises price to 96.957 or 97.057, which lowers the YTW, which we could calculate, or Vanguard will show it to you if you click through to the first buy screen, enter quantity and click Calculate.

From the search results screen, click on the CD description, and you will see the details screen. On the right there is a section titled Coupon schedule. It shows:

05/20/2016 1.25
05/20/2019 1.50
05/20/2020 3.00
11/20/2020 5.00

A little lower you see the call schedule (partial):

05/20/2017 100.00
11/20/2017 100.00
05/20/2018 100.00
11/20/2018 100.00
05/20/2019 100.00

There's a link to see the full call schedule, but for some reason it's not working for me. At any rate, it looks like it's callable at 100 on 5/20 and 11/20 of each year.

I would think it's unlikely that the CD will be called before 5/20/2020, because 1.25% or 1.5% is way less than what you could get for a 2-year CD today, so yields would have to drop a lot by then for them to call it at 1.5%. But who knows for sure.

It's more likely it would be called at 3% on 5/20/2020, and highly likely that it would be called at 5% on 11/20/2020. So the yield to worst assumes that the bond is called on one of the call dates. Not sure which one, but it could be calculated.

At any rate, if it called on 5/20/2020, and assuming the YTW is for that call date, you would end up earning about 3% for a 2-year CD if you didn't pay commission. However, if you're paying 2$/CD, that knocks about 10 basis points of the yield you'd actually get, so it's more like 2.8% for a 2-year CD, which is just competitive with new-issue 2-year CD, and less than the 2.85% I got for a 2-year CD yesterday.

I personally haven't even been looking at stepped or callable CDs, but maybe I've been missing out on some good opportunities by not doing so. I'd have to look more closely at what call date they're assuming, and what the net yield would be after my commission rate of $1/CD. Maybe someone with more experience with these types of CDs can chime in, but it looks like more work to evaluate whether or not they are competitive with fixed-coupon non-callable CDs.

Kevin
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Mitchell777
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Mitchell777 » Wed May 23, 2018 9:11 pm

Thanks Kevin. I'm going to print this one. Very insightful.

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

Post by Kevin M » Wed May 23, 2018 9:44 pm

I did some more work, trying to see if I could work out the yield to worst assuming different call dates, and using the spreadsheet XIRR function. I couldn't think of an easier way to do it, since the coupon rate changes. The closest I could come was an IRR of 3.03% if called on 5/20/2020, so a couple of basis points higher than the 3.01% YTW Vanguard shows. This assumes no commission.

At a commission of $2/CD, the 3.03% drops to 2.93%. Even knocking off 3 basis points to align with Vanguard's number, that's 2.90%, which is a bit higher than the best secondary 2-year CD yield I've seen lately, and that's paying $1/CD. At $1/CD commission, I get 2.98% (2.95% if subtract 3 bps), which would be excellent for a 2-year CD.

However, I get about the same IRR if it were called on 11/20/2020. That's still good for a 2.5-year CD, but not as good as for a 2-year CD.

I'm not 100% confident in my calculations, but the CD looks pretty good. The problem I have is that it's much more complicated to analyze a CD like this, figure out when it's likely to be called, and try to verify Vanguard's displayed YTW. Maybe that's why there appears to be a yield premium for this CD--a "hard to understand" yield premium.

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

Post by likashing » Thu May 24, 2018 5:45 pm

2.80% now for Morgan Stanley new issue available at Vanguard.

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

Post by likashing » Fri May 25, 2018 1:36 pm

Still learning about brokered CDs. For new issues, are the following 3 new issues essentially the same at 2.80%?

05581WXZ3
61747MZ95
949763RD0

issued by BMO Harris, Morgan Stanley, and Wells Fargo, respectively. Thanks!

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

Post by sport » Fri May 25, 2018 1:49 pm

likashing wrote:
Fri May 25, 2018 1:36 pm
Still learning about brokered CDs. For new issues, are the following 3 new issues essentially the same at 2.80%?

05581WXZ3
61747MZ95
949763RD0

issued by BMO Harris, Morgan Stanley, and Wells Fargo, respectively. Thanks!
The only difference I can see is that Wells Fargo pays interest monthly while the other two pay semiannually. So, WF is a little better, if you want to lend your money to them.

Mitchell777
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Mitchell777 » Tue May 29, 2018 2:38 pm

Kevin, or others. Does this mean you get no interest for the last month? Matures 6/8 but final coupon is 5/6 - Thanks
CUSIP
949763RD0
Security type
Certificate of deposit
Issuer
Wells Fargo Bank, National Association
Maturity
06/08/2020
Coupon
2.800
Debt ranking
Unknown
Security notes

FDIC no.
3511
State
SD
Coupon type
Regular
Next coupon
07/06/2018
State restrictions

Conditional put
Yes
Conditional put
reason
Death of holder
Survivor option
Yes
Min. increment
1,000
Min. denomination
1,000
Redemption price
100.000
Pay frequency
Monthly
Day count
Actual/365
Bond form
Book entry



Issuance
Dated date
06/06/2018
First settlement
06/06/2018
First coupon
07/06/2018
Last coupon
05/06/2020

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

Post by Kevin M » Tue May 29, 2018 2:56 pm

Mitchell777 wrote:
Tue May 29, 2018 2:38 pm
Kevin, or others. Does this mean you get no interest for the last month? Matures 6/8 but final coupon is 5/6 - Thanks
CUSIP
949763RD0
<snip>
I doubt it. Either it is a mistake, or they're lumping in the last interest payment with the principal repayment. I believe you are seeing this at Vanguard, as I see it there but not at Fidelity. If you are interested in this CD, call Vanguard fixed income and ask them this question.

FYI, I just got 2.853% net for 2-year CD at Fidelity, but this is with $1/CD commission, and I'm seeing nothing near this good at Vanguard (as often is the case lately).

Kevin
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Mitchell777
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Mitchell777 » Tue May 29, 2018 3:20 pm

Kevin M wrote:
Tue May 29, 2018 2:56 pm
Mitchell777 wrote:
Tue May 29, 2018 2:38 pm
Kevin, or others. Does this mean you get no interest for the last month? Matures 6/8 but final coupon is 5/6 - Thanks
CUSIP
949763RD0
<snip>
I doubt it. Either it is a mistake, or they're lumping in the last interest payment with the principal repayment. I believe you are seeing this at Vanguard, as I see it there but not at Fidelity. If you are interested in this CD, call Vanguard fixed income and ask them this question.

FYI, I just got 2.853% net for 2-year CD at Fidelity, but this is with $1/CD commission, and I'm seeing nothing near this good at Vanguard (as often is the case lately).

Kevin
FI said it's an error and last coupon is at maturity. I did not realize the info I see on the sceeen for CD's is not from a Vanguard platform, it goes out to various houses selling the CD's, according to the lady in FI.

Mitchell777
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Mitchell777 » Tue May 29, 2018 5:17 pm

I'm not sure what to believe. Another one popped up cusip 01748DBC9 with 6-15-20 maturity and 12-13-19 last coupon (semi annual)

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

Post by Kevin M » Tue May 29, 2018 7:15 pm

Mitchell777 wrote:
Tue May 29, 2018 5:17 pm
I'm not sure what to believe. Another one popped up cusip 01748DBC9 with 6-15-20 maturity and 12-13-19 last coupon (semi annual)
I think what's going on is since the bond matures two days after the last coupon would normally be paid, 6/13/2020, they just skip the last "normal" coupon payment and pay the final interest payment at maturity, 6/15/2020. EDIT: This explains your first example as well.

Here's an article I found that discusses this. It's much more technical than you need to just explain what's going on, but it happened to be the first one I found with a web search: http://westclintech.com/Blog/tabid/132/ ... oupon.aspx.

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

Post by likashing » Wed Jun 06, 2018 12:04 pm

Schwab is $1 per CD but with $10 minimum. So you have to buy $10k or more in order to get the $1 commission.

Question, I see Schwab quotes being worse than Fidelity. Does Schwab include commission in the quote? How about Fidelity?

From Schwab and Fidelity's CD search results screen:

Capital One 140420G61
Schwab = 3.107% YTM
Fidelity = 3.134% YTM

Capital One 140420F62
Schwab = 3.087% YTM
Fidelity = 3.120% YTM

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

Post by Kevin M » Wed Jun 06, 2018 12:41 pm

likashing wrote:
Wed Jun 06, 2018 12:04 pm
Schwab is $1 per CD but with $10 minimum. So you have to buy $10k or more in order to get the $1 commission.

Question, I see Schwab quotes being worse than Fidelity. Does Schwab include commission in the quote? How about Fidelity?

From Schwab and Fidelity's CD search results screen:

Capital One 140420G61
Schwab = 3.107% YTM
Fidelity = 3.134% YTM

Capital One 140420F62
Schwab = 3.087% YTM
Fidelity = 3.120% YTM
Fidelity does not include commission in the yields displayed on the search results screen. However, if you click buy, enter quantity, then click "Preview", the net yield (after commission) is displayed (you can then cancel at that point if you don't want to actually buy). Perhaps you could try the same thing at Schwab--I assume they have similar functionality that shows you net yield.

The Schwab yields do look like about the Fidelity yield after commission.

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

Post by likashing » Thu Jun 07, 2018 1:27 pm

Kevin M wrote:
Wed Jun 06, 2018 12:41 pm
likashing wrote:
Wed Jun 06, 2018 12:04 pm
Schwab is $1 per CD but with $10 minimum. So you have to buy $10k or more in order to get the $1 commission.

Question, I see Schwab quotes being worse than Fidelity. Does Schwab include commission in the quote? How about Fidelity?

From Schwab and Fidelity's CD search results screen:

Capital One 140420G61
Schwab = 3.107% YTM
Fidelity = 3.134% YTM

Capital One 140420F62
Schwab = 3.087% YTM
Fidelity = 3.120% YTM
Fidelity does not include commission in the yields displayed on the search results screen. However, if you click buy, enter quantity, then click "Preview", the net yield (after commission) is displayed (you can then cancel at that point if you don't want to actually buy). Perhaps you could try the same thing at Schwab--I assume they have similar functionality that shows you net yield.

The Schwab yields do look like about the Fidelity yield after commission.

Kevin
I could only get enough $ to my Schwab account so the info below is based on $10 commission for 1 CD ($1000).

CD = 1404202A7

Fidelity quote = 44(min 1) available at 97.197 = 3.180% yield
Schwab quote = 44(min 1) available at 97.297 = 3.152% yield

It is possible? Aren't they looking at the same exchanges?

I have clicked through the buy screen until right before placing the order, and it looks like Schwab sells at a worse price for the exact same thing.

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

Post by likashing » Thu Jun 07, 2018 1:33 pm

I have looked at 3 other Capital One CDs, Schwab's quotes are $0.100 more for all 3 of them.

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

Post by protagonist » Fri Jun 08, 2018 9:41 am

Ignore this post.

(Nothing substantial to add....I just want the thread to pop up when I click on "your posts".)

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by protagonist » Tue Jun 19, 2018 11:52 pm

Bought 18 mo. maturity at Fido on secondary market today- yield 2.79% lowered to about 2.73% after commission.
Bought 24 mo. maturity at Fido on secondary market today- yield about 2.92% after commission.

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

Post by Kevin M » Wed Jun 20, 2018 12:27 pm

protagonist wrote:
Tue Jun 19, 2018 11:52 pm
Bought 18 mo. maturity at Fido on secondary market today- yield 2.79% lowered to about 2.73% after commission.
Bought 24 mo. maturity at Fido on secondary market today- yield about 2.92% after commission.
Nice. What quantities? Typically see the best deals on small quantities, like 5 or less.

Kevin
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MikeMak27
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by MikeMak27 » Wed Jun 20, 2018 1:21 pm

I purchased a 1 lot cd maturing 6-15-2021 from some small bank like St. Cloud or something at 3.111 yesterday for my parents ira. Was this a decent yield compared to the market? Most two years were about 2.86% at the time so I figured the extra 0.25% yield was worth it. I believe it compounds monthly.
Mac 4 fund portfolio: 45% US small cap value (IJS, VBR), 40% Emerging Markets (IEMG, VWO, FPMAX), 10% long term US treasuries (TLT), 5% US REITS (VNQ)

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

Post by Kevin M » Wed Jun 20, 2018 2:35 pm

MikeMak27 wrote:
Wed Jun 20, 2018 1:21 pm
I purchased a 1 lot cd maturing 6-15-2021 from some small bank like St. Cloud or something at 3.111 yesterday for my parents ira. Was this a decent yield compared to the market? Most two years were about 2.86% at the time so I figured the extra 0.25% yield was worth it. I believe it compounds monthly.
A CD maturing in 2021 is a 3-year CD, and new-issue 3-year CD yield is 3.00%.

Is the 3.11% before commission or after commission, and is the commission $1/CD or $2/CD (0.1% or 0.2%)?

The 2.86% you're quoting for 2-year CDs seems like before commission yield.

If the 3.11 is before commission, and they are paying 0.2% commission, that's about 20 basis points amortized over three years, so knocks off about 7 basis points from the yield. That's about 3.04% after commission, so slightly better than a new-issue at 3.0%.

It's hard to beat new-issue 2-year or 3-year by much, if at all, if paying 0.2% commission, but pretty easy if paying 0.1% commission.

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

Post by protagonist » Wed Jun 20, 2018 3:06 pm

Kevin M wrote:
Wed Jun 20, 2018 12:27 pm
protagonist wrote:
Tue Jun 19, 2018 11:52 pm
Bought 18 mo. maturity at Fido on secondary market today- yield 2.79% lowered to about 2.73% after commission.
Bought 24 mo. maturity at Fido on secondary market today- yield about 2.92% after commission.
Nice. What quantities? Typically see the best deals on small quantities, like 5 or less.

Kevin
Small, but not that small. About 15K each. I figure if they are all in Fidelity, it eliminates a lot of bookkeeping hassle anyway, so I can have a lot of little ones. I have ones that mature in about 1 1/2 years, 2 years, 2 1/2 years. 3 years. Still buying.

That said, .1% of 15000 is only $15/year for a relatively short time, so I suppose chasing yield is a bit silly. More of a game actually.

I have a larger amount in a 2 year new issue at 2.8%.

Thanks for teaching me about the secondary market. I'm still a bit naive but learning.
Last edited by protagonist on Thu Jun 21, 2018 9:45 am, edited 3 times in total.

MikeMak27
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by MikeMak27 » Wed Jun 20, 2018 4:12 pm

Kevin M wrote:
Wed Jun 20, 2018 2:35 pm
MikeMak27 wrote:
Wed Jun 20, 2018 1:21 pm
I purchased a 1 lot cd maturing 6-15-2021 from some small bank like St. Cloud or something at 3.111 yesterday for my parents ira. Was this a decent yield compared to the market? Most two years were about 2.86% at the time so I figured the extra 0.25% yield was worth it. I believe it compounds monthly.
A CD maturing in 2021 is a 3-year CD, and new-issue 3-year CD yield is 3.00%.

Is the 3.11% before commission or after commission, and is the commission $1/CD or $2/CD (0.1% or 0.2%)?

The 2.86% you're quoting for 2-year CDs seems like before commission yield.

If the 3.11 is before commission, and they are paying 0.2% commission, that's about 20 basis points amortized over three years, so knocks off about 7 basis points from the yield. That's about 3.04% after commission, so slightly better than a new-issue at 3.0%.

It's hard to beat new-issue 2-year or 3-year by much, if at all, if paying 0.2% commission, but pretty easy if paying 0.1% commission.

Kevin
Kevin, we’re using fidelity, so it’s $1 for a 1,000 cd secondary purchase. So I guess instead of it yielding 3.111% it yields 3.101. It was also bought yesterday so 6-15-2021 is just under 3 years.
Mac 4 fund portfolio: 45% US small cap value (IJS, VBR), 40% Emerging Markets (IEMG, VWO, FPMAX), 10% long term US treasuries (TLT), 5% US REITS (VNQ)

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

Post by Kevin M » Wed Jun 20, 2018 4:35 pm

MikeMak27 wrote:
Wed Jun 20, 2018 4:12 pm
Kevin, we’re using fidelity, so it’s $1 for a 1,000 cd secondary purchase. So I guess instead of it yielding 3.111% it yields 3.101. It was also bought yesterday so 6-15-2021 is just under 3 years.
Yes, slightly less than 3-year maturity, so better to compare to 3-year than 2-year. Soonest settlement on a new-issue 3-year at Fidelity is 6/26/2018 for CD maturing 6/28/2021. If you bought yesterday, you got a settlement date of 6/21/2018, so about a week shorter maturity, and sooner settlement, so money starts earning the CD rate sooner.

Amortizing 0.1% over three years knocks roughly 3.3 basis points of the yield, so net yield is somewhere between 3.07% and 3.08%. Your confirmation will show your net yield. Also, after you enter the quantity on the buy screen and click "Preview Order", it will show you your net yield.

So yeah, you get about 7 or 8 basis points over the new-issue yield, and for slightly less maturity, which is pretty typical for 3-year on secondary market. I saw several today in the same ballpark.

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

Post by MikeMak27 » Wed Jun 20, 2018 4:46 pm

Thank you for the detailed explanation on calculating net yield and how to see it before purchasing with Fidelity. You’re as helpful on this site as anyone!
Mac 4 fund portfolio: 45% US small cap value (IJS, VBR), 40% Emerging Markets (IEMG, VWO, FPMAX), 10% long term US treasuries (TLT), 5% US REITS (VNQ)

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by jeffyscott » Thu Jun 21, 2018 8:50 am

sport wrote:
Fri May 25, 2018 1:49 pm
likashing wrote:
Fri May 25, 2018 1:36 pm
Still learning about brokered CDs. For new issues, are the following 3 new issues essentially the same at 2.80%?

05581WXZ3
61747MZ95
949763RD0

issued by BMO Harris, Morgan Stanley, and Wells Fargo, respectively. Thanks!
The only difference I can see is that Wells Fargo pays interest monthly while the other two pay semiannually. So, WF is a little better, if you want to lend your money to them.
I did know interest was not reinvested, but if monthly is better, I take it that there also is no compounding with brokered CDs that do not pay monthly interest? So a $10,000 CD at 3% would pay either $150 every 6 months or $25 per month.

I'll be making my first purchase later today (or ordering it, anyway). :)
press on, regardless - John C. Bogle

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

Post by sport » Thu Jun 21, 2018 9:12 am

jeffyscott wrote:
Thu Jun 21, 2018 8:50 am
sport wrote:
Fri May 25, 2018 1:49 pm
likashing wrote:
Fri May 25, 2018 1:36 pm
Still learning about brokered CDs. For new issues, are the following 3 new issues essentially the same at 2.80%?

05581WXZ3
61747MZ95
949763RD0

issued by BMO Harris, Morgan Stanley, and Wells Fargo, respectively. Thanks!
The only difference I can see is that Wells Fargo pays interest monthly while the other two pay semiannually. So, WF is a little better, if you want to lend your money to them.
I did know interest was not reinvested, but if monthly is better, I take it that there also is no compounding with brokered CDs that do not pay monthly interest? So a $10,000 CD at 3% would pay either $150 every 6 months or $25 per month.

I'll be making my first purchase later today (or ordering it, anyway). :)
Yes, there is no compounding. If a CD pays interest more often, you just get some of the interest a little sooner. So, that money starts to compound in your settlement fund, or wherever else you put it.

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

Post by protagonist » Thu Jun 21, 2018 9:46 am

Last I checked the 7 day yield of Fidelity Premium Money Market FZDXX was 1.92%- pretty competitive with the best rates at external banks.
I moved essentially all my cash from my external bank account into Fidelity. I have long used Fidelity as my main checking account, moving money in from an external account according to need, and now I am essentially using it as my main savings account as well. So holding several CDs at Fidelity is easy, even in small quantities- I just treat them as cash that I cannot touch. This takes much of the bookkeeping hassle out of owning CDs when they are scattered at multiple institutions with different maturities.

I am curious though- since the CDs are issued by actual banks, are they covered by FDIC insurance when purchased through Fidelity via the secondary market, just as if you bought them directly through the bank in question?

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by sport » Thu Jun 21, 2018 9:57 am

protagonist wrote:
Thu Jun 21, 2018 9:46 am
I am curious though- since the CDs are issued by actual banks, are they covered by FDIC insurance when purchased through Fidelity via the secondary market, just as if you bought them directly through the bank in question?
At Vanguard, all the CDs are FDIC insured. I would think the same is true at Fidelity, but I don't know for sure. If you buy a CD on the secondary market at a premium, only the face amount of the CD is insured. The description of the CD should give the FDIC number.

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

Post by protagonist » Thu Jun 21, 2018 10:21 am

sport wrote:
Thu Jun 21, 2018 9:57 am
protagonist wrote:
Thu Jun 21, 2018 9:46 am
I am curious though- since the CDs are issued by actual banks, are they covered by FDIC insurance when purchased through Fidelity via the secondary market, just as if you bought them directly through the bank in question?
At Vanguard, all the CDs are FDIC insured. I would think the same is true at Fidelity, but I don't know for sure. If you buy a CD on the secondary market at a premium, only the face amount of the CD is insured. The description of the CD should give the FDIC number.
If it is true at Vanguard I would be confident that the same holds at Fidelity. Thanks for the answer.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by jeffyscott » Thu Jun 21, 2018 12:36 pm

Any reason not to buy a new issue callable CD? If they call it for some reason, I just can just buy another most likely with a higher yield.

Just when I was about to order one I had been looking at was gone, but a new one that seems interesting has appeared. It is a 3 year at 3.1%, callable in 6 mo. (CUSIP 319141KT3), if anyone were offering a 6 month CD with 3.1%, I would certainly take it over a 2 or 3 year at 2.8% to 3.0%.
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by sport » Thu Jun 21, 2018 12:48 pm

The CD will be called if rates go down. So, you lose the guaranteed rate for the remainder of the term. It's kind of a heads I win, tails you lose. If rates rise, it is not called and you are stuck at the lower rate, but if rates fall, they call it. The yield should be a little higher to compensate you for this risk.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by jeffyscott » Thu Jun 21, 2018 12:58 pm

sport wrote:
Thu Jun 21, 2018 12:48 pm
The CD will be called if rates go down. So, you lose the guaranteed rate for the remainder of the term. It's kind of a heads I win, tails you lose. If rates rise, it is not called and you are stuck at the lower rate, but if rates fall, they call it. The yield should be a little higher to compensate you for this risk.
Thanks that's what I thought. It's a small amount, so I am taking it for the extra 0.1%.

I doubt rates go down and if they do, then I will make a lot more on my bond funds than I lose on this (and probably lose a whole lot more in stocks, as it probably mean a recession...and so I could put then put the proceeds into stocks as a rebalancing).
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by jeffyscott » Thu Jun 21, 2018 2:09 pm

One more beginner's question...

The order options were "fill or kill" or "market", does this choice even matter for a new issue CD? I just left it on the one it had defaulted to, "fill or kill".
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Kevin M » Thu Jun 21, 2018 4:48 pm

jeffyscott wrote:
Thu Jun 21, 2018 2:09 pm
One more beginner's question...

The order options were "fill or kill" or "market", does this choice even matter for a new issue CD? I just left it on the one it had defaulted to, "fill or kill".
Shouldn't matter for new issue. I always leave it at the default of fill or kill.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Kevin M » Thu Jun 21, 2018 5:45 pm

Today at Fidelity, the yield on new-issue 3-year CD increased from 3.00% to 3.10%, yield on the 1-year increased to 2.40% (was at 2.30% yesterday I think, but it hit 2.35% a few times recently), and yield on 5-year increased to 3.40%. Yield on new-issue 2-year unchanged at 2.80%.

The 3.10% is offered by one bank, FIRST BANK HIGHLAND PARK, but a downside is that it is callable at 100 beginning 12/29/2018, and quarterly after that. Since it has been possible to get 3.1% or close to it for a 3-year CD on the secondary market at Fidelity, I don't think I'd buy this CD. As of now, there are only 69 available.

TEXAS EXCHANGE BANK is offering a new issue 3-year at 3.05%, but it also is callable at 100, beginning 6/29/2019, and monthly thereafter. Not interested.

Many banks still are offering non-callable 3-year at 3.00% at Fidelity. Three banks are offering the 2-year at 2.80%.

Two banks are offering the 1-year at 2.40%, non-callable, interest payable at maturity. Five banks are offering a 1-year at 2.35%.

When I click on the 5-year 3.40%, none are shown, so maybe this one is gone. Six banks are offering 5-year at 3.30%.

Vanguard still shows 3.00% for 3-year, offered by six banks, and also still 2.80% for 2-year, but offered by only one bank (Wells Fargo). Vanguard also has the 1-year at 2.40%, offered by three banks, and the 5-year at 3.30% offered by seven banks.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Kevin M » Thu Jun 21, 2018 6:17 pm

protagonist wrote:
Thu Jun 21, 2018 9:46 am
I am curious though- since the CDs are issued by actual banks, are they covered by FDIC insurance when purchased through Fidelity via the secondary market, just as if you bought them directly through the bank in question?
In your search results screen, look at the far-right column, Attributes and Issuer Events. You will see FDIC as one of the attributes for every CD you look at. In the Attributes Legend, you'll see that this means FDIC insured (kind of obvious). I don't believe Fidelity would offer a CD that's not FDIC insured, but let us know if you ever see one.

Keep in mind that to determine your FDIC insurance coverage, you need to aggregate the amount you have in a bank via brokered CDs with what you have in the bank directly (in CDs, savings, checking, and any other deposit accounts) in a given ownership category.

For example, I own some IRA CDs directly at Synchrony Bank, and also have bought some Synchrony Bank brokered CDs in my Fidelity IRA.

Also keep in mind that two CDs could show different bank names but still fall under the coverage for one bank. For example, I own a CD with this description: GE CAPITAL RETAIL BANK DRAPER UT CD FDIC #27314 CPN 2.20000 % MTD 2020-04-06 DTD 2014-04-04. Turns out that FDIC #27314 is the same as for Synchrony bank, so I need to include the GE Capital CD along with my Synchrony Bank CDs for determining FDIC insurance coverage.

Banks could even have different FDIC #s, but fall under the same coverage. There are a couple of STATE BANK OF INDIA banks in this category. There is an FDIC site where you can look this stuff up.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Kevin M » Thu Jun 21, 2018 6:28 pm

jeffyscott wrote:
Thu Jun 21, 2018 12:36 pm
Any reason not to buy a new issue callable CD? If they call it for some reason, I just can just buy another most likely with a higher yield.

Just when I was about to order one I had been looking at was gone, but a new one that seems interesting has appeared. It is a 3 year at 3.1%, callable in 6 mo. (CUSIP 319141KT3) <snip>.
Sorry, I had not paid enough attention to your post before I published my update above, in which I discussed this CD.

As I mentioned there, it should be pretty easy to find a 3-year CD at 3.1% on the secondary market, even after commission. As another example, about a week ago, I bought some of a 31-month CD at a net yield of about 3.05%, so five month less maturity and higher yield than a new-issue 3-year CD.

Although market is closed, for smaller quantities I see 10 (minimum 10) of a CD maturing 6/15/2021 at 3.15%, which should come to about 3.12% after commission. For larger quantities I see 125 with minimum 50 at 3.161%. There are a couple others that come to 3.1% or more after commission.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by jeffyscott » Thu Jun 21, 2018 6:50 pm

No problem, Kevin. I was only looking at new issues for now and figured I'd take the chance for reasons given.

Our first CD, representing less than 1/2% of our portfolio :) . I'm starting small, but finally starting...
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by jeffyscott » Thu Jun 21, 2018 9:14 pm

Kevin M wrote:
Thu Jun 21, 2018 6:28 pm
As I mentioned there, it should be pretty easy to find a 3-year CD at 3.1% on the secondary market, even after commission. As another example, about a week ago, I bought some of a 31-month CD at a net yield of about 3.05%, so five month less maturity and higher yield than a new-issue 3-year CD.

Although market is closed, for smaller quantities I see 10 (minimum 10) of a CD maturing 6/15/2021 at 3.15%, which should come to about 3.12% after commission. For larger quantities I see 125 with minimum 50 at 3.161%. There are a couple others that come to 3.1% or more after commission.

Kevin
You know as someone had noted above, I think maybe Schwab does not have as good a selection of secondary CDs or prices are higher? I don't see 6/15/21, but there are 15 of a 06/14/2021, it is at 3.011 and so would be less than 3% after commission.

While I wasn't really looking at secondaries, I think at one point I was looking at a listing of all of them and none were any better than 3.1% even before commission, unless you went out to beyond 3.5 years. Looking again now, and that is the case there is one at 3.1% but maturity is just a month short of 3 years and after commission it would be less.

None of their secondary ones actually seem to make any sense from what I can see. For example to get over 2.8% you have to go to at least 08/24/2020 (and then only get 2.819%, which I believe would be under 2.8% after commission) on secondary, but can get 2.8% on new issue with 06/29/2020.
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Kevin M » Thu Jun 21, 2018 9:23 pm

jeffyscott wrote:
Thu Jun 21, 2018 9:14 pm
Kevin M wrote:
Thu Jun 21, 2018 6:28 pm
As I mentioned there, it should be pretty easy to find a 3-year CD at 3.1% on the secondary market, even after commission. As another example, about a week ago, I bought some of a 31-month CD at a net yield of about 3.05%, so five month less maturity and higher yield than a new-issue 3-year CD.

Although market is closed, for smaller quantities I see 10 (minimum 10) of a CD maturing 6/15/2021 at 3.15%, which should come to about 3.12% after commission. For larger quantities I see 125 with minimum 50 at 3.161%. There are a couple others that come to 3.1% or more after commission.

Kevin
You know as someone had noted above, I think maybe Schwab does not have as good a selection of secondary CDs or prices are higher? I don't see 6/15/21, but there are 15 of a 06/14/2021, it is at 3.011 and so would be less than 3% after commission.

While I wasn't really looking at secondaries, I think at one point I was looking at a listing of all of them and none were any better than 3.1% even before commission, unless you went out to beyond 3.5 years. Looking again now, and that is the case there is one at 3.1% but maturity is just a month short of 3 years and after commission it would be less.

None of their secondary ones actually seem to make any sense from what I can see. For example to get over 2.8% you have to go to at least 08/24/2020 (and then only get 2.819%, which I believe would be under 2.8% after commission) on secondary, but can get 2.8% on new issue with 06/29/2020.
OK, for some reason I thought you were looking at Fidelity. I guess Schwab has the same new issue callable 3-year at 3.1% that I see at Fidelity.

No account at Schwab in many years, but I usually see better secondary CD deals at Fidelity than at Vanguard. I have regularly been able to get about 2.85% or more for 2-year after commission with the new-issue at 2.80%, and virtually always see 3-year at 3.05% or above after commission with new-issue at 3.0% at Fidelity. Generally not the case at Vanguard, although a really good deal will pop up now and then for a very small quantity.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by protagonist » Thu Jun 21, 2018 10:34 pm

Kevin M wrote:
Thu Jun 21, 2018 6:17 pm
protagonist wrote:
Thu Jun 21, 2018 9:46 am
I am curious though- since the CDs are issued by actual banks, are they covered by FDIC insurance when purchased through Fidelity via the secondary market, just as if you bought them directly through the bank in question?
In your search results screen, look at the far-right column, Attributes and Issuer Events. You will see FDIC as one of the attributes for every CD you look at. In the Attributes Legend, you'll see that this means FDIC insured (kind of obvious). I don't believe Fidelity would offer a CD that's not FDIC insured, but let us know if you ever see one.

Keep in mind that to determine your FDIC insurance coverage, you need to aggregate the amount you have in a bank via brokered CDs with what you have in the bank directly (in CDs, savings, checking, and any other deposit accounts) in a given ownership category.

For example, I own some IRA CDs directly at Synchrony Bank, and also have bought some Synchrony Bank brokered CDs in my Fidelity IRA.

Also keep in mind that two CDs could show different bank names but still fall under the coverage for one bank. For example, I own a CD with this description: GE CAPITAL RETAIL BANK DRAPER UT CD FDIC #27314 CPN 2.20000 % MTD 2020-04-06 DTD 2014-04-04. Turns out that FDIC #27314 is the same as for Synchrony bank, so I need to include the GE Capital CD along with my Synchrony Bank CDs for determining FDIC insurance coverage.

Banks could even have different FDIC #s, but fall under the same coverage. There are a couple of STATE BANK OF INDIA banks in this category. There is an FDIC site where you can look this stuff up.

Kevin
Thanks for the valuable insight, as usual!

There is definitely a bookkeeping plus to being able to hold multiple CDs issued by multiple banks all at Fidelity and have each insured to 250K.

Correct me if I am wrong, but I also imagine there would be little incentive to selling brokered CDs when rates increase in order to buy a better brokered CD, since the loss of value of the CD at premature sale would likely counterbalance the advantage of buying a new issue at a better rate. This seems to be the case as there is a rather narrow YTW range at which CDs are selling at Fidelity with similar maturity dates. This is not always the case with CDs purchased directly from an institution since EWPs are fixed regardless of fluctuating interest rates and rates offered at institutions vary quite substantially. Does that make sense?

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by gips » Thu Jun 21, 2018 11:38 pm

protagonist wrote:
Thu Jun 21, 2018 10:34 pm

Correct me if I am wrong, but I also imagine there would be little incentive to selling brokered CDs when rates increase in order to buy a better brokered CD, since the loss of value of the CD at premature sale would likely counterbalance the advantage of buying a new issue at a better rate. This seems to be the case as there is a rather narrow YTW range at which CDs are selling at Fidelity with similar maturity dates. This is not always the case with CDs purchased directly from an institution since EWPs are fixed regardless of fluctuating interest rates and rates offered at institutions vary quite substantially. Does that make sense?
for the same maturity, that's true, but depending on the shape of the yield curve and one's needs, I'd guess a case could be made for selling brokered cds and purchasing a different maturity.

We're about to purchase a CD, personally, I think 3-years for 20-30 basis points isn't worth it given where I believe interest rates are going this year, so we're sticking to 2 years or less. I'm not really close to purchasing tips, but I have my eye on their yields.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by shipwreck » Fri Jun 22, 2018 4:07 am

protagonist wrote:
Thu Jun 21, 2018 9:46 am
Last I checked the 7 day yield of Fidelity Premium Money Market FZDXX was 1.92%- pretty competitive with the best rates at external banks.
Effective after the close of business on December 31, 2015, new positions in the fund are limited to accounts beneficially owned by natural persons, as determined by the fund.
and
Minimum to Invest $100,000.00 .

I don't think this is a fair comparison to external banks.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by jeffyscott » Fri Jun 22, 2018 6:19 am

Kevin M wrote:
Thu Jun 21, 2018 9:23 pm
No account at Schwab in many years, but I usually see better secondary CD deals at Fidelity than at Vanguard. I have regularly been able to get about 2.85% or more for 2-year after commission with the new-issue at 2.80%, and virtually always see 3-year at 3.05% or above after commission with new-issue at 3.0% at Fidelity. Generally not the case at Vanguard, although a really good deal will pop up now and then for a very small quantity.

Kevin
I would think that in order to sell, the secondary ones would need to be priced to pay at least the same as a new issues after commission? They don't seem to be at Schwab. I'll take another look when the market is open, as I am curious about this seemingly odd pricing.

The only thing I can think of is since Schwab's settlement account pays near nothing :annoyed, that makes the secondary CD's look better because you would then be investing the cash right away instead of getting 0.18% while you wait. I can see that low yield settlement fund is going to be a minor annoyance with interest payments from CDs, it would be nice if they gave an option to automatically invest interest payments in a mutual fund of your choosing.
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by sport » Fri Jun 22, 2018 8:53 am

jeffyscott wrote:
Fri Jun 22, 2018 6:19 am
The only thing I can think of is since Schwab's settlement account pays near nothing , that makes the secondary CD's look better because you would then be investing the cash right away instead of getting 0.18% while you wait. I can see that low yield settlement fund is going to be a minor annoyance with interest payments from CDs, it would be nice if they gave an option to automatically invest interest payments in a mutual fund of your choosing.
Vanguard's settlement fund, VMFXX (Federal MM fund), has an SEC yield of 1.80%. So, I don't mind having CD interest payments sit there for a while.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by protagonist » Fri Jun 22, 2018 9:16 am

shipwreck wrote:
Fri Jun 22, 2018 4:07 am
protagonist wrote:
Thu Jun 21, 2018 9:46 am
Last I checked the 7 day yield of Fidelity Premium Money Market FZDXX was 1.92%- pretty competitive with the best rates at external banks.
Effective after the close of business on December 31, 2015, new positions in the fund are limited to accounts beneficially owned by natural persons, as determined by the fund.
and
Minimum to Invest $100,000.00 .

I don't think this is a fair comparison to external banks.
Not a comparison in those terms, no. But an alternative for some seeking high yield and total liquidity. I use it as a checking account.
I don't know what a "natural person" is. *laughing* I thought we were all natural.
It costs $100K to get in, but you only have to maintain a balance of $10K, so if you can handle the initial deposit it then becomes doable for many natural people. From what I heard through the grapevine, they rarely police the $10K minimum, and worst case scenario if your balance drops lower you get bumped out of the fund and into your core money market. If that happens to me I will just transfer the money back into my external account yielding 2.01%- no big deal. But I maintain over $10K in emergency funds anyway, so I'm not too worried about it.
Last edited by protagonist on Fri Jun 22, 2018 9:22 am, edited 1 time in total.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by protagonist » Fri Jun 22, 2018 9:20 am

gips wrote:
Thu Jun 21, 2018 11:38 pm




We're about to purchase a CD, personally, I think 3-years for 20-30 basis points isn't worth it given where I believe interest rates are going this year, so we're sticking to 2 years or less. I'm not really close to purchasing tips, but I have my eye on their yields.
I agree with you, gips. I am buying more in the 2 year maturity range for the same reason.

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Re: 2-year CDs at Vanguard and Fidelity Today

Post by jeffyscott » Fri Jun 22, 2018 10:09 am

Following up on secondary CDs at Schwab, with the market open...

One thing is there are about a billion more secondary CDs there now. But more importantly it appears that they calculate YTM including commission. I looked for CDs yielding at least 2.8% and the earliest maturing one makes for a fairly easy estimate of YTM since it has exactly 2 years to go to maturity.

I went through as if I were ordering Discover 2.75% CD maturing 06/22/2020 (CUSIP 254673QL3). For 10, here is what Schwab shows:

Market Price: $9,975.00
Estimated Markup: $10.00
Principal Amount: $9,985.00
Accrued Interest: $4.52
Estimated Total Cost: $9,989.52

I used this calculator: http://www.investinganswers.com/calcula ... lator-2081

Input face value = $10,000, coupon 2.75%, and $9985 for current bond price (which includes commission) and it give YTM of 2.83%. Schwab lists it as 2.828%.

If Fido ignores commission then I believe that they should be showing this one with YTM of about 2.88%.
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Re: 2-year CDs at Vanguard and Fidelity Today

Post by Kevin M » Fri Jun 22, 2018 12:40 pm

jeffyscott wrote:
Fri Jun 22, 2018 10:09 am
Following up on secondary CDs at Schwab, with the market open...

One thing is there are about a billion more secondary CDs there now. But more importantly it appears that they calculate YTM including commission. I looked for CDs yielding at least 2.8% and the earliest maturing one makes for a fairly easy estimate of YTM since it has exactly 2 years to go to maturity.

I went through as if I were ordering Discover 2.75% CD maturing 06/22/2020 (CUSIP 254673QL3). For 10, here is what Schwab shows:

Market Price: $9,975.00
Estimated Markup: $10.00
Principal Amount: $9,985.00
Accrued Interest: $4.52
Estimated Total Cost: $9,989.52

I used this calculator: http://www.investinganswers.com/calcula ... lator-2081

Input face value = $10,000, coupon 2.75%, and $9985 for current bond price (which includes commission) and it give YTM of 2.83%. Schwab lists it as 2.828%.

If Fido ignores commission then I believe that they should be showing this one with YTM of about 2.88%.
Thanks for the intel on Schwab.

Yes, I see this CD at Fidelity (only 1 available) at 99.747 with yield before commission of 2.881%. When I click buy and look at preview, it shows net yield of 2.829222%.

I am not seeing any screaming good CD deals today. On my last pull from Fidelity, for quantity/min-quantity between 5 and 25, I saw 23.2-month at 2.81% net, and 25-month at 2.85% net, for example. As usual, yield premiums over new-issue at 3-year maturity are better--I see 35.8-month at 3.11% net.

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