Garden SFCU 4% 4-year CD, 6 month EWP

[nalor511]

Did anyone else see this 4%/4.0%APY CD at Garden Savings:
https://www.gardensavingsfcu.org/notice-details.html
https://www.depositaccounts.com/banks/g ... s-fcu.html

It's also listed on their main rate page:
https://www.gardensavingsfcu.org/servic ... rtificates

On terms of 1 year or greater, early withdrawal penalty is 180 days of dividends earned.

Free membership by joining american consumer council. Text:

Join us as we celebrate America's military Veterans this month with two great certificate specials ... and we'll donate money to support our Veterans as you do! For a limited time only take advantage of the following great rates:
2-Year Certificates 3.00% rate 3.04% Annual Percentage Yield
4-Year Certificates 4.00% rate 4.08% Annual Percentage Yield

Seems like a good deal, but I've not heard the name before. If anyone does business with them already, how's it been?

[LadyGeek]

This thread is now in the Personal Finance (Not Investing) forum (CD).

[random_walker_77]

Wow, that's a really good rate. How good? US treasuries for 3yrs is at 3.01%, and 5-10yr treasuries go up to 3.22%. It even beats the 30 yr treasury. And it is insured NCUA.

I think the catch here is that they seem to really need the capital, but at those rates, they should be able to pull in plenty. bankrate has them listed as below-average in financial strength: https://www.bankrate.com/credit-unions/ ... gs/199481/

I'm guessing the risk is that if they go under, the CD's rate might go away? So you'll get back your money but lose the great rate?
Still, 4% is pretty tempting for a 4yr CD

references:

NCUA: https://www.gardensavingsfcu.org/about- ... union.html
treasury rates: https://www.treasury.gov/resource-cente ... data=yield

[lakpr]

Here's another perspective from DepositAccounts, which gives this credit union a B+ grade:

https://www.depositaccounts.com/banks/g ... tml#health

The Texas Ratio is an indicator of how much capital a bank has available compared to the total value of loans considered at risk. As of June 30, 2018 Garden Savings Federal Credit Union had $4.3 million in non-current loans and owned real-estate with $36.63 million in equity and loan loss allowances on hand to cover it. This gives Garden Savings Federal Credit Union a Texas Ratio of 11.75% which is above average. Any bank with a Texas Ratio near or greater than 100% is considered at risk.

The Texas Ratio for Garden Savings Federal Credit Union decreased slightly from 15.21% as of June 30, 2017 to 11.75% as of June 30, 2018, resulting in a positive change of 22.75%.This indicates that the balance sheet and financial strength for Garden Savings Federal Credit Union has improved slightly in recent periods.

[nalor511]

My only hesitation is that I'd have to pay a 6mo EWP to get the money for this (so effectively 1.5% APY in penalty). Anyone going to jump?

[nalor511]

Anybody doing this one? Kevin?

[pancake19]

Pretty interesting, I have some Andrews FCU 7Y @3% when they ran that promo a few years ago, might be worthwhile just to switch it to this...

[fortfun]

[Thread merged into here, see below. --admin LadyGeek]

https://www.gardensavingsfcu.org/notice-details.html

Has anyone used them? What do you think of these rates?

[Silk McCue]

Take a look at this recent post on Garden Savings. In the future you can search site posts using the Google driven search box to see if information is already available on your inquiry.

viewtopic.php?t=263285&p=4201801#p4201795

Cheers

[djpeteski]

I assume you are looking for the best rates:

Fidelity brokered rates as of 11/8/19
6 month: 2.4%
2 year: 3.1%

They don't offer anything at 4% currently, but that could change.

[midareff]

Ally 11 month with no early break penalty 2.1% 12 month 2.5% ... you should check their products.

[fortfun]

Ally 11 month with no early break penalty 2.1% 12 month 2.5% ... you should check their products.

Thanks midareff. That's currently what I have. Are these 3% and 4% worth considering?

[robertmcd]

The 4 yr for 4%, coupled with a 180 day EWP is a good deal, currently the best longer term CD.

[willthrill81]

Ally 11 month with no early break penalty 2.1% 12 month 2.5% ... you should check their products.

Thanks midareff. That's currently what I have. Are these 3% and 4% worth considering?

The DFA/Swedroe approach with CDs is to the purchase the longest term CD up to the point where going one year further would result in additional yield of under 20 basis points (.2%). So if the yields on 2, 3, and 4 year CDs were 3%, 3.5% and 3.6%, you would go with the 3 year at 3.5% because going out to 4 years would only get you 10 additional basis points (.1%).

[fortfun]

Ally 11 month with no early break penalty 2.1% 12 month 2.5% ... you should check their products.

Thanks midareff. That's currently what I have. Are these 3% and 4% worth considering?

The DFA/Swedroe approach with CDs is to the purchase the longest term CD up to the point where going one year further would result in additional yield of under 20 basis points (.2%). So if the yields on 2, 3, and 4 year CDs were 3%, 3.5% and 3.6%, you would go with the 3 year at 3.5% because going out to 4 years would only get you 10 additional basis points (.1%).

Thanks willthrill. Wouldn't it be .5 (3.5 to 4.0?) Am I missing something?

[BL]

Just got an email from PenFed CU about their 2.71% 1-yr rate. I am sticking to 1-yr for now with rates increasing.

Vanguard Prime MM is now 2.22% and Federal MM is 2.11% SEC rate.

[BL]

Ally 11 month with no early break penalty 2.1% 12 month 2.5% ... you should check their products.

Thanks midareff. That's currently what I have. Are these 3% and 4% worth considering?

The DFA/Swedroe approach with CDs is to the purchase the longest term CD up to the point where going one year further would result in additional yield of under 20 basis points (.2%). So if the yields on 2, 3, and 4 year CDs were 3%, 3.5% and 3.6%, you would go with the 3 year at 3.5% because going out to 4 years would only get you 10 additional basis points (.1%).

Thanks willthrill. Wouldn't it be .5 (3.5 to 4.0?) Am I missing something?

This is just an example.

[willthrill81]

Ally 11 month with no early break penalty 2.1% 12 month 2.5% ... you should check their products.

Thanks midareff. That's currently what I have. Are these 3% and 4% worth considering?

The DFA/Swedroe approach with CDs is to the purchase the longest term CD up to the point where going one year further would result in additional yield of under 20 basis points (.2%). So if the yields on 2, 3, and 4 year CDs were 3%, 3.5% and 3.6%, you would go with the 3 year at 3.5% because going out to 4 years would only get you 10 additional basis points (.1%).

Thanks willthrill. Wouldn't it be .5 (3.5 to 4.0?) Am I missing something?

As noted above, it was merely an example. Look at the yields for different time frames to determine when going out one year more would result in additional yield of under .2%.

[LadyGeek]

I merged fortfun's thread into the on-going discussion, which is in the Personal Finance (Not Investing) forum (CD).

[whodidntante]

Anybody doing this one? Kevin?

[fortfun]

Ally 11 month with no early break penalty 2.1% 12 month 2.5% ... you should check their products.

Thanks midareff. That's currently what I have. Are these 3% and 4% worth considering?

The DFA/Swedroe approach with CDs is to the purchase the longest term CD up to the point where going one year further would result in additional yield of under 20 basis points (.2%). So if the yields on 2, 3, and 4 year CDs were 3%, 3.5% and 3.6%, you would go with the 3 year at 3.5% because going out to 4 years would only get you 10 additional basis points (.1%).

Thanks willthrill. Wouldn't it be .5 (3.5 to 4.0?) Am I missing something?

As noted above, it was merely an example. Look at the yields for different time frames to determine when going out one year more would result in additional yield of under .2%.

Thanks willthrill. What do you think of the 4% rate on 4 years?

[Kevin M]

As others have pointed out, this is an excellent yield on a 4-year fixed-income security with minimal credit risk, and low term risk due to the EWP of 180 days of interest. I probably would jump on it if I had a bunch of cash ready to go, but I went for the Ally promo of $1K on $100K of new deposits, which comes to a yield of 6.7% or so for a term of about 75 days. Who knows what will be available early next year. Good deals seem to be popping up more frequently lately.

I recently got 4.2% on a 5-year IRA CD in a credit union where I had a couple of CDs at about 2.7%, and was allowed to do a penalty-free withdrawal due to being age 59 1/2 or older. And it's penalty free to do an early withdrawal from that one too, if I want.

The problem with IRAs is that it takes time to do the IRA transfer, and by the time it's done, the rate could have fallen (happened to me once). It has been posted on DA that they won't lock the rate, as some CUs and banks will do once they've received the transfer form.

I've gotten lazy about joining credit unions, especially when it comes to IRAs, but like I said, if I had enough taxable cash to make it worth it, I probably would do it. I'm loath to sell any existing fixed income to raise the cash, due to the possibility of the rate dropping before I get it into the CD.

My PenFed taxable CDs at 3% are maturing in one and two months, so doesn't make sense to do early withdrawals from those.

If I had some taxable CDs at 3% with say a couple of years or more remaining to maturity, and an EWP of six months of interest, I'd consider breaking them to invest in this 4-year CD. You'd make the 1.5% EWP back in about 1.5 years at the 1 percentage point higher rate, then you start pulling ahead with the 4% rate.

For comparison, a 3-year Treasury at about 3% is a TEY for me of about 3.4%, and you don't get much more for extending maturity to four years (5-year is only about 7 basis points more than the 3-year). So let's call the CD yield premium about 60 basis points over Treasury TEY for same maturity. My average direct CD yield premium is about 115 basis points for direct CDs bought since late 2010, but I don't compute this on a TEY basis for the Treasuries, so this CD is pretty close to my average premium.

Kevin

[willthrill81]

Thanks midareff. That's currently what I have. Are these 3% and 4% worth considering?

The DFA/Swedroe approach with CDs is to the purchase the longest term CD up to the point where going one year further would result in additional yield of under 20 basis points (.2%). So if the yields on 2, 3, and 4 year CDs were 3%, 3.5% and 3.6%, you would go with the 3 year at 3.5% because going out to 4 years would only get you 10 additional basis points (.1%).

Thanks willthrill. Wouldn't it be .5 (3.5 to 4.0?) Am I missing something?

As noted above, it was merely an example. Look at the yields for different time frames to determine when going out one year more would result in additional yield of under .2%.

Thanks willthrill. What do you think of the 4% rate on 4 years?

Post #6,000!

It looks very solid to me. It definitely sounds more attractive than a bond fund these days.

[midareff]

Ally 11 month with no early break penalty 2.1% 12 month 2.5% ... you should check their products.

Thanks midareff. That's currently what I have. Are these 3% and 4% worth considering?

Currently Ally's best 3 year is 2.75%....3.10% for a 5 year. If you can commit to the time yours would be a better deal. I had been talking to Ally about several things and they told me I could set the Cd to pay interest monthly to my checking account. For me, Ally looks like a good one year commitment at 2.5% and see what the Fed is doing then. FWIW, I'll be 71 next month and for me I like shorter term commitments now.

[fortfun]

The DFA/Swedroe approach with CDs is to the purchase the longest term CD up to the point where going one year further would result in additional yield of under 20 basis points (.2%). So if the yields on 2, 3, and 4 year CDs were 3%, 3.5% and 3.6%, you would go with the 3 year at 3.5% because going out to 4 years would only get you 10 additional basis points (.1%).

Thanks willthrill. Wouldn't it be .5 (3.5 to 4.0?) Am I missing something?

As noted above, it was merely an example. Look at the yields for different time frames to determine when going out one year more would result in additional yield of under .2%.

Thanks willthrill. What do you think of the 4% rate on 4 years?

Post #6,000!

It looks very solid to me. It definitely sounds more attractive than a bond fund these days.

I'm honored to get your 6k post!

[fortfun]

Ally 11 month with no early break penalty 2.1% 12 month 2.5% ... you should check their products.

Thanks midareff. That's currently what I have. Are these 3% and 4% worth considering?

Currently Ally's best 3 year is 2.75%....3.10% for a 5 year. If you can commit to the time yours would be a better deal. I had been talking to Ally about several things and they told me I could set the Cd to pay interest monthly to my checking account. For me, Ally looks like a good one year commitment at 2.5% and see what the Fed is doing then. FWIW, I'll be 71 next month and for me I like shorter term commitments now.

Thanks midareff. Any concerns with this particular bank?

[MikeG62]

Ally 11 month with no early break penalty 2.1% 12 month 2.5% ... you should check their products.

Thanks midareff. That's currently what I have. Are these 3% and 4% worth considering?

Currently Ally's best 3 year is 2.75%....3.10% for a 5 year. If you can commit to the time yours would be a better deal. I had been talking to Ally about several things and they told me I could set the Cd to pay interest monthly to my checking account. For me, Ally looks like a good one year commitment at 2.5% and see what the Fed is doing then. FWIW, I'll be 71 next month and for me I like shorter term commitments now.

Thanks midareff. Any concerns with this particular bank?

I'm not midareff, but I was reading about the offer on Deposit Accounts and someone in the comments mentioned that the period of inactivity before GSCU would turn over the account to the state is 3 years. So wonder if you opened just the CD and had no other activity whether there would be a risk of the funds being escheated to the state in year 4? May depend on their definition of activity.

[DarkHelmetII]

Here's another perspective from DepositAccounts, which gives this credit union a B+ grade:

https://www.depositaccounts.com/banks/g ... tml#health

Is B+ good or bad?

[fortfun]

Here's another perspective from DepositAccounts, which gives this credit union a B+ grade:

https://www.depositaccounts.com/banks/g ... tml#health

Is B+ good or bad?

Thanks Darkhelmet.

[JackoC]

Ally 11 month with no early break penalty 2.1% 12 month 2.5% ... you should check their products.

Thanks midareff. That's currently what I have. Are these 3% and 4% worth considering?

The DFA/Swedroe approach with CDs is to the purchase the longest term CD up to the point where going one year further would result in additional yield of under 20 basis points (.2%). So if the yields on 2, 3, and 4 year CDs were 3%, 3.5% and 3.6%, you would go with the 3 year at 3.5% because going out to 4 years would only get you 10 additional basis points (.1%).

I've seen that mentioned before (perhaps by you), still don't see how it makes sense taken out of context of the general shape of the 'riskless' yield curve. If the curve were very steep upsloping a CD with >.20% more yield might have a significantly lower spread to the treasury curve than a shorter maturity CD and I don't see a logical argument why a narrower spread would be preferable to a wider one in general.

Today's treasury curve though is relatively flat especially past 2 yrs, still slightly upsloping. The Garden Savings 4.08% APR is distinctly higher spread to the treasury curve than any shorter CD; now despositaccounts.com shows a 4% 5yr but that's a little narrower since the 5 yr note still yields slightly more than the 3yr note. This is the best current deal AFAIK. Although as was suggested now we're in a period where CD rates are undergoing their typically delayed reaction to a significant rise in treasury yields and more 4% deals seem likely to pop up if treasury yields don't drop significantly. So this isn't as stellar a deal as 4% in 5.25 yrs which is the last CD I bought, which was also just a higher spread, 134 bps to the T curve while this one was just over 100 as of yesterday. My current stable of CD's avg'd 97 at purchase (I know some have done better ).

[ten2go]

Due to the tremendous success of our certificate promotion, we have concluded the special rates that were being offered as of the end of business on Friday, November 9th. However you can still join us as we celebrate America's military Veterans this month as we will continue to donate money to support our Veterans for every new certificate opened this month! Check out our rates page for all of our latest certificate rate offers.

Looks like the 4% rates are gone. The best I see now is 2.5% for 5 years.

[Kevin M]

I've seen that mentioned before (perhaps by you), still don't see how it makes sense taken out of context of the general shape of the 'riskless' yield curve. If the curve were very steep upsloping a CD with >.20% more yield might have a significantly lower spread to the treasury curve than a shorter maturity CD and I don't see a logical argument why a narrower spread would be preferable to a wider one in general.

For whatever yield curve you're looking at, the basic idea is to be sufficiently compensated for taking the extra term risk. Note that many don't buy into this, the argument being that to that extent bond markets are efficient, future yield expectations are reflected in the yield curve; so a flat yield curve at longer maturities reflects expectations that longer-term yields are not expected to increase.

Although I understand the counter-argument, I still want to be compensated for taking more term risk. The downside of staying shorter-term is more reinvestment risk, but I'm more averse to term risk than to reinvestment risk.

With Treasuries and CDs, I look at both the incremental return for extending maturity, and the yield premium of CDs over Treasuries.

In taxable accounts I use my taxable-equivalent yield (TEY) for Treasuries, which in the current environment, gives my higher TEY than brokered CDs out to at least 3-year maturity. However, the Treasury yield curve is too flat for my taste beyond 2-year maturity, providing only an extra 6 basis points or so of TEY for extending from 2-year to 3-year maturity.

In an IRA, the yield premium of a 2-year CD at 3.10% over a 2-year Treasury at about 2.95% is about 15 basis points, so I'd probably go for the CD as long as I will for sure hold to maturity. The 3-year brokered CD at 3.25% is a yield premium of 25 bps over the 3-year Treasury at about 3%, but it's only an additional 15 bps over the 2-year CD for adding one year of maturity. I'd tend to stick with the 2-year CD in an IRA. Just because the Treasury yield curve is even flatter than the CD yield curve between 2-year and 3-year maturities doesn't necessarily make it worth it to me to take the extra one year of term risk for only 15 bps.

Kevin

[InertiaMan]

The details page for this offer now shows an "update" that they have concluded their special rates offer as of this afternoon (Friday Nov 9).

So that's it for 4%/4yr . . . at least for now.

[Kevin M]

The details page for this offer now shows an "update" that they have concluded their special rates offer as of this afternoon (Friday Nov 9).

So that's it for 4%/4yr . . . at least for now.

And that makes my points!

The problem with IRAs is that it takes time to do the IRA transfer, and by the time it's done, the rate could have fallen (happened to me once). It has been posted on DA that they won't lock the rate, as some CUs and banks will do once they've received the transfer form.
<snip>
I'm loath to sell any existing fixed income to raise the cash, due to the possibility of the rate dropping before I get it into the CD.

With these deals, you need be ready to move quickly as soon as the deals are announced. There wouldn't have been enough time to do an IRA transfer, unless perhaps you had used overnight mail for the transfer form and had arranged for a wire transfer (if that were even possible).

Kevin

[JackoC]

I've seen that mentioned before (perhaps by you), still don't see how it makes sense taken out of context of the general shape of the 'riskless' yield curve. If the curve were very steep upsloping a CD with >.20% more yield might have a significantly lower spread to the treasury curve than a shorter maturity CD and I don't see a logical argument why a narrower spread would be preferable to a wider one in general.

For whatever yield curve you're looking at, the basic idea is to be sufficiently compensated for taking the extra term risk. Note that many don't buy into this, the argument being that to that extent bond markets are efficient, future yield expectations are reflected in the yield curve; so a flat yield curve at longer maturities reflects expectations that longer-term yields are not expected to increase.

Although I understand the counter-argument, I still want to be compensated for taking more term risk. The downside of staying shorter-term is more reinvestment risk, but I'm more averse to term risk than to reinvestment risk.

With Treasuries and CDs, I look at both the incremental return for extending maturity, and the yield premium of CDs over Treasuries.

That's fair enough. I was just pointing to my puzzlement at a rule that only seemed to take into account the differences in CD yield by maturity without considering the shape of the treasury curve, ie the spread to treasuries of best CD yields in various maturities. I didn't mean to say one should be indifferent to maturity on the treasury curve because 'it's all efficient'.

There is no reason to think today's curve is an unbiased estimators of future short term rates, there is no violation of market efficiency if it's not. Because, lenders and borrowers have varying degrees of aversion to taking term risk in lending and borrowing rates, varying over time and according to conditions (how much risk of much different than expected inflation, and so forth). IOW there is usually a non zero term premium, the difference between the *risk neutral* expectation of future rates derived from simply looking at today's curve, and the actual expectation including the net risk premium. That can come out at zero but generally not. Historically it's usually positive (term rates give a higher ex-ante expected return than rolling over shorter term investments).

But, the NY Federal Reserve runs and frequently updates a model of the term premium called ACM, after its authors, here:
https://www.newyorkfed.org/research/dat ... remia.html
And it shows the term premium has turned negative recently. The graph on the header page is for 10 yrs: investing in 10 yr (zero coupon) had ex-ante expectation of beating rolling investments in the short rate over most of the period since 1961, positive term premium. Lately it's turned negative, per this model and other models tend to agree (there's a blog article comparing a few).

This is one factor in my disinclination toward duration risk, though not the only one (I have some investments in real estate, also some EM stock exposure and those are both typically more sensitive to long rates than US/DM stocks are). However, it doesn't give me a strong preference between say a 3, 4 or 5 yr CD, especially given the embedded put option of early withdrawal right: the value of that option is also increasing, even in bps per annum, with CD maturity, for a given EWP. I would usually take the CD in that range with the highest spread to treasuries, though also depending at the margin on miscellaneous stuff like how it fit into my 'ladder. The significantly greater labor component of shifting around accounts every 2 or fewer years has generally turned me off to CD's that short, but if the spread was high enough maybe.

[nalor511]

The details page for this offer now shows an "update" that they have concluded their special rates offer as of this afternoon (Friday Nov 9).

So that's it for 4%/4yr . . . at least for now.

Wow, that sucks, they haven't even processed my application yet and it's been 2 days, I'm willing to bet not many new customers were able to get this, if any. I did delay a day in pulling the trigger, but that's not very long really. Yikes.