Bank Interest Rates — when will they go up?

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travelogue
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Bank Interest Rates — when will they go up?

Post by travelogue » Thu May 17, 2018 10:57 am

With 10 year Treasury yields over 3.1% as of this posting, I’m wondering when we can expect to see banks raising money market and savings account rates up. Cap One 360 has had their Money Market Account stuck at 1.6% ($10k balance +) for some time. Ally’s online savings is also 1.6%. Shuoldn’t these be creeping up along with the general interest rate environment (like treasuries, mortgage rates, etc.)? Are bank interest rates basically based on competition?

(Edit: by the way, I’m not even mentioning the laughable average interest rate for traditional retail banks. Like 0.01% to, oh wow, 0.05%.)

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David Jay
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Re: Bank Interest Rates — when will they go up?

Post by David Jay » Thu May 17, 2018 11:02 am

I know that Vanguard's money market rates have been creeping upwards for some time - VMMXX (Prime Money Market) SEC yield is 1.85% today.

CDs are up nicely (3.2% on a 5 year today on the Vanguard site).
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lack_ey
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Re: Bank Interest Rates — when will they go up?

Post by lack_ey » Thu May 17, 2018 11:07 am

These bank rates are not of products that are traded on the market, and these types of accounts are used by individuals. Thus there's no direct linkage with the fixed income market. If banks don't see it in their interest to raise the rates they pay on deposit accounts, then they won't. They might in order to compete with each other, but it depends on how much they actually want your money, and how much inflows they could actually capture with higher rates relative to the costs of actually paying those rates out. A lot of money is sticky in the sense that most people aren't churning through new accounts every few months hunting for whoever has the highest rate at that time, especially for physical banks.

In any case, you should be comparing to short-term rates such as on T-bills or the Fed funds rate as more relevant benchmarks, not the 10-year Treasury.

Usually when short rates rise, bank deposit account rates lag behind somewhat.

You can just keep most cash in market-based instruments if they have higher rates, like money market funds (or something riskier if appropriate).

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Cyclesafe
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Re: Bank Interest Rates — when will they go up?

Post by Cyclesafe » Thu May 17, 2018 11:14 am

They won't rise rates until they start losing significant deposits. Most bank balances are very low, so there is little dollar incentive for a depositor to "upset" his life by actually doing something. And the great number of small deposits add up to major opportunity for banks in this environment.

Look for banks to start making available (not promoting them, of course) accounts with different names that will be competitive with other banks, but hoping that for many depositors inertia prevails.

david1082b
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Re: Bank Interest Rates — when will they go up?

Post by david1082b » Thu May 17, 2018 11:23 am

Ally has been going up, the thread about Ally gets bumped every time. CD rates have gone higher.

Fed Funds rate is 1.69% https://fred.stlouisfed.org/series/FEDFUNDS

Difficult to expect short term savings to be higher than that. Go for 5 year or 7 year CDs for the best rates.

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Re: Bank Interest Rates — when will they go up?

Post by nisiprius » Thu May 17, 2018 11:31 am

travelogue wrote:
Thu May 17, 2018 10:57 am
With 10 year Treasury yields over 3.1% as of this posting, I’m wondering when we can expect to see banks raising money market and savings account rates up. Cap One 360 has had their Money Market Account stuck at 1.6% ($10k balance +) for some time. Ally’s online savings is also 1.6%. Shuoldn’t these be creeping up along with the general interest rate environment (like treasuries, mortgage rates, etc.)? Are bank interest rates basically based on competition?

(Edit: by the way, I’m not even mentioning the laughable average interest rate for traditional retail banks. Like 0.01% to, oh wow, 0.05%.)
Savings and money market accounts would be expected to compete with the short-term end of the yield curve. That is to say, Treasury bills, which are paying 1.69% as I write this.

So 1.6% at Capital One 360 seems darned competitive, to me.

Our local brick-and-mortar bank recently introduced a Sapphire Octahedron Hi-Yield-X-Treme Prestige Premium Pro Money Market Account with a 1.50% API, and that doesn't seem bad, either.

You can't expect savings and "money market" deposit account rates to match 10-year Treasury rates.

Daily Treasury yield curve

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Jack FFR1846
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Re: Bank Interest Rates — when will they go up?

Post by Jack FFR1846 » Thu May 17, 2018 11:37 am

Having lived through the late 70's when car loans were 20% for great credit and later in the mid 80's when 13.8% was the best 15 year mortgage offered, bank rates were much higher. I had a 6 month CD around 1988 that was 10%.

So what?

Rates that banks pay are always going to be less than inflation. So money in any bank account will always lose you money. If you're hoping for higher rates, you're really hoping that gas goes to $4....that electricity goes to 40 cents a kWHr.....that an average car costs $50k.

There will certainly be leapfrogging of rates by banks in tiny little jumps. <shrug> You can get more money by moving around between the highest rate accounts, but you're not going to beat your costs.
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Kevin M
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Re: Bank Interest Rates — when will they go up?

Post by Kevin M » Thu May 17, 2018 11:51 am

Online bank interest rates have been rising. Although much lower, average bank rates have been rising too. Read this blog post, https://www.depositaccounts.com/blog/ba ... ts-survey/, and look at the chart a couple of pages down.

You mention Ally Bank at 1.60%--it was at 1.50% on 5/10/2018. It was at 1.00% on 4/20/2017, and has been gradually rising ever since.

There is one bank paying 2.05%.

Prime money market yield has been steadily rising, and now is 1.85%. A muni money market may have a higher taxable equivalent yield, depending on your tax rates. CA muni MM for me is 1.95% TEY, but the muni MM funds cycle up and down on something like a quarterly cycle--it was 2.26% TEY for me a few weeks ago.

As already mentioned, bank savings account (and money market) rates are tied more to the federal funds rate (FFR) than to the 10-year Treasury note. The 1-month Treasury yield also tracks the FFR quite closely.

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DaftInvestor
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Re: Bank Interest Rates — when will they go up?

Post by DaftInvestor » Thu May 17, 2018 12:19 pm

It seems to be happening slowly but surely.
gsbank just went up to 1.7% percent and synchrony recently to 1.65%.

SuperGrafx
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Re: Bank Interest Rates — when will they go up?

Post by SuperGrafx » Thu May 17, 2018 12:21 pm

Discover Online Bank just boosted their savings interest rate to 1.55% this morning.
It's been at 1.50% for a while, and they usually lag a bit behind Ally, etc.

Dead Man Walking
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Re: Bank Interest Rates — when will they go up?

Post by Dead Man Walking » Thu May 17, 2018 11:21 pm

A small local brick and mortar bank in my area is offering 1.51% on new money market accounts with a minimum deposit of $20,000. The rate is guaranteed through July, 2019. They also offer competitive rates on CDs ranging from 1-3 years with $2,500 minimum requirements. Another local bank offers CDs with competitive rates in unusual durations - 14 months, 25 months, and 37 months. Both banks offer rates slightly below or equal to online banks; however, the durations are usually a month longer than the typical durations.

Many older folks who aren't comfortable with online banking have been pouring money into these banks. Local credit unions, Chase, Huntington, and PNC don't seem to mind that these customers are moving their money to these banks. A few million in deposits doesn't affect banks with billions or trillions in assets. We must remember that a million minutes is about 12 days; a billion minutes is about 34 years.

To answer your question - no time soon. Online banks will be quicker to raise rates.

DMW

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welderwannabe
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Re: Bank Interest Rates — when will they go up?

Post by welderwannabe » Fri May 18, 2018 5:56 am

Dead Man Walking wrote:
Thu May 17, 2018 11:21 pm
We must remember that a million minutes is about 12 days; a billion minutes is about 34 years.
I assume you meant a million seconds is 12 days?
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mouses
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Re: Bank Interest Rates — when will they go up?

Post by mouses » Fri May 18, 2018 7:22 am

There appears to be some oddities in the CD rates offered by my local credit unions in the past several years. One has been stuck at low rates for years, and when I asked why they said their goal is to loan money at low rates to members. Some others drift upwards. Every so often one that is not drifting upwards has a somewhat surprising increase in a rate for some smallish or odd term for a short period of time.

nolesrule
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Re: Bank Interest Rates — when will they go up?

Post by nolesrule » Fri May 18, 2018 9:17 am

travelogue wrote:
Thu May 17, 2018 10:57 am
Cap One 360 has had their Money Market Account stuck at 1.6% ($10k balance +) for some time.
Here's the entire history of APY changes on the Money Market Account.

Jun 27 2017 - 1.10%
Aug 25 2017 - 1.20%
Oct 25 2017 - 1.30%
Jan 11 2018 - 1.40%
Feb 15 2018 - 1.50%
Apr 19 2018 - 1.60%

4 weeks hardly qualifies as "stuck...for some time."

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ReformedSpender
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Re: Bank Interest Rates — when will they go up?

Post by ReformedSpender » Fri May 18, 2018 9:23 am

nolesrule wrote:
Fri May 18, 2018 9:17 am

4 weeks hardly qualifies as "stuck...for some time."

+1 agreed

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Re: Bank Interest Rates — when will they go up?

Post by alex_686 » Fri May 18, 2018 9:47 am

david1082b wrote:
Thu May 17, 2018 11:23 am
Fed Funds rate is 1.69% https://fred.stlouisfed.org/series/FEDFUNDS
Here is a niffty little tool on the market's expected fed fund rate for the next year.

http://www.cmegroup.com/trading/interes ... -fomc.html

Glockenspiel
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Re: Bank Interest Rates — when will they go up?

Post by Glockenspiel » Fri May 18, 2018 9:50 am

If you bank at Wells Fargo, US Bank, Chase, CitiBank, or Bank of America and expect them to raise their interest rates on deposits, you're delusional. :D

LiterallyIronic
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Re: Bank Interest Rates — when will they go up?

Post by LiterallyIronic » Fri May 18, 2018 9:59 am

Glockenspiel wrote:
Fri May 18, 2018 9:50 am
If you bank at Wells Fargo, US Bank, Chase, CitiBank, or Bank of America and expect them to raise their interest rates on deposits, you're delusional. :D
https://www.valuepenguin.com/average-sa ... rest-rates

Wells Fargo = 0.01% (0.05% if you have $100,000+)
US Bank = 0.01%
Chase = 0.01% (0.08% if you have $1,000,000+)
CitiBank = 0.01%
BOA = 0.01%

I do bank at one of those, but I don't expect them to raise their rates. Of course, I don't choose a place to bank by chasing yield. I choose a place to bank for their customer service.

Dead Man Walking
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Re: Bank Interest Rates — when will they go up?

Post by Dead Man Walking » Fri May 18, 2018 4:19 pm

welderwannabe wrote:
Fri May 18, 2018 5:56 am
Dead Man Walking wrote:
Thu May 17, 2018 11:21 pm
We must remember that a million minutes is about 12 days; a billion minutes is about 34 years.
I assume you meant a million seconds is 12 days?
Thanks for correcting my error. It's further proof that most people have difficulty conceptualizing millions and billions - which was the point I was attempting to make.

DMW

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welderwannabe
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Re: Bank Interest Rates — when will they go up?

Post by welderwannabe » Fri May 18, 2018 8:04 pm

Dead Man Walking wrote:
Fri May 18, 2018 4:19 pm
Thanks for correcting my error. It's further proof that most people have difficulty conceptualizing millions and billions - which was the point I was attempting to make.
:) What else are we all here for but to nitpick eachother's posts? I had to look at your post 2-3 times thinking it looked wrong but not being able to put my finger on it! :wink:
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bluerafters
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Re: Bank Interest Rates — when will they go up?

Post by bluerafters » Fri May 18, 2018 8:39 pm

Couple mentions of Ally in this thread. Do you guys find them good to deal with?

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Kevin M
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Re: Bank Interest Rates — when will they go up?

Post by Kevin M » Fri May 18, 2018 8:45 pm

bluerafters wrote:
Fri May 18, 2018 8:39 pm
Couple mentions of Ally in this thread. Do you guys find them good to deal with?
Great to deal with, so good hub bank, but rates currently are not generally competitive. Much better CD rates elsewhere, and much better savings account rates elsewhere too, and also money market funds now have better rates.

I use them for checking, savings, bill pay, and Zelle, but keep bulk of savings and all CDs elsewhere.

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peterinjapan
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Re: Bank Interest Rates — when will they go up?

Post by peterinjapan » Fri May 18, 2018 9:27 pm

Fidelity's CDs are amazing and they have an automated ladder tool

https://www.fidelity.com/learning-cente ... cd-ladders

bluerafters
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Re: Bank Interest Rates — when will they go up?

Post by bluerafters » Sat May 19, 2018 10:49 am

peterinjapan wrote:
Fri May 18, 2018 9:27 pm
Fidelity's CDs are amazing and they have an automated ladder tool

https://www.fidelity.com/learning-cente ... cd-ladders
The 5 year is incredible. First time I've ever seen it set up like that.

travelogue
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Re: Bank Interest Rates — when will they go up?

Post by travelogue » Sun May 20, 2018 5:08 pm

Thanks for the perspective and information, everyone! I’ve been watching the equity markets react to rate changes and was just wondering when other rates might move as well.

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Kevin M
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Re: Bank Interest Rates — when will they go up?

Post by Kevin M » Sun May 20, 2018 7:41 pm

travelogue wrote:
Sun May 20, 2018 5:08 pm
Thanks for the perspective and information, everyone! I’ve been watching the equity markets react to rate changes and was just wondering when other rates might move as well.
I think we've shown that many of them have been moving.

Kevin
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pascalwager
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Re: Bank Interest Rates — when will they go up?

Post by pascalwager » Sat Jun 09, 2018 1:36 am

I like my Synchrony Bank HY Savings account. The interest rate has been rising twice a month now: 1.75% APY and FDIC protection. I'm not even tempted by the Vanguard MM Funds with their greater risks.

My savings account begins to spill over* next week and I think I'll start moving the spillover into four-week T-bills at Treasury Direct (TD). Or I might even move larger amounts into three- and six-month T-bills. I probably should, I guess, to reduce the state tax liability. Actually, it might make sense now to move most of it to TD.

*amount above FDIC protection limit

AlphaLess
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Re: Bank Interest Rates — when will they go up?

Post by AlphaLess » Sat Jun 09, 2018 2:32 am

travelogue wrote:
Thu May 17, 2018 10:57 am
With 10 year Treasury yields over 3.1% as of this posting, I’m wondering when we can expect to see banks raising money market and savings account rates up. Cap One 360 has had their Money Market Account stuck at 1.6% ($10k balance +) for some time. Ally’s online savings is also 1.6%. Shuoldn’t these be creeping up along with the general interest rate environment (like treasuries, mortgage rates, etc.)? Are bank interest rates basically based on competition?

(Edit: by the way, I’m not even mentioning the laughable average interest rate for traditional retail banks. Like 0.01% to, oh wow, 0.05%.)
The top end of the demand account interest has been going up with Fed Funds / short end of the curve.
Term CDs are going up with the appropriate point on the curve.

If FOMC raises next week, we will see some interest increases.
Marcus has raised rates twice, 10 bps each time, in the last few months.

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