Best CD rates thread

[patrick013]

People can speculate all they want about the future rate of inflation, but no one knows what it will be. Looking at something like the breakeven inflation rate (spread between nominal Treasury and TIPS yields), the market is betting that inflation will be low for many years, but the market has gotten it wrong before.
Kevin

While it is true that no one knows, the Fed does have an explicit inflation target of 2%. It seems reasonable to assume that they will take action should it be significantly out of line with that rate for a period of time with the goal of bringing it back in line.

Most recent guess by the Fed for 5 year forward inflation
is 1.54 %.

Most recent observation for 10 year TRSY spread from effective
FFR is .54 %. Usually spreads are higher than average when
the FFR spikes to the low side. Common observations are low
spreads will continue however.

[jeffyscott]

People can speculate all they want about the future rate of inflation, but no one knows what it will be. Looking at something like the breakeven inflation rate (spread between nominal Treasury and TIPS yields), the market is betting that inflation will be low for many years, but the market has gotten it wrong before.
Kevin

While it is true that no one knows, the Fed does have an explicit inflation target of 2%. It seems reasonable to assume that they will take action should it be significantly out of line with that rate for a period of time with the goal of bringing it back in line.

Most recent guess by the Fed for 5 year forward inflation
is 1.54 %.

Most recent observation for 10 year TRSY spread from effective
FFR is .54 %. Usually spreads are higher than average when
the FFR spikes to the low side. Common observations are low
spreads will continue however.

Recently learned that "5 year forward" means the 5 years that begin 5 years from now. That 1.54% appears to be just based on TIPS/nominal spreads. The 10 year TIPS vs. nominal implies 1.41% inflation, which would be a cumulative 15% over the 10 year period. The 5 year spread implies 1.28% for the first 5 years of the next 10, in order to get to 15% cumulative over the full 10, the second 5 years would need to have 1.54% inflation.

[Eno Deb]

And now we have the June CPI numbers. Seasonally adjusted monthly change for June was +0.57% (reported as 0.6% on BLS site, which only reports to one decimal place). This is an annualized rate of +7.00% (=(1+0.57%)^12-1), so a savings account earning 1% in June earned about -6% real.

This is misleading. The CPI increase last month was largely due to a partial recovery of the oil price since the crash in February/March (it has roughly doubled from the bottom as oil production is in the process of being adjusted to demand). These are extraordinary circumstances and you can't simply extrapolate from that to the entire year.

[patrick013]

People can speculate all they want about the future rate of inflation, but no one knows what it will be. Looking at something like the breakeven inflation rate (spread between nominal Treasury and TIPS yields), the market is betting that inflation will be low for many years, but the market has gotten it wrong before.
Kevin

While it is true that no one knows, the Fed does have an explicit inflation target of 2%. It seems reasonable to assume that they will take action should it be significantly out of line with that rate for a period of time with the goal of bringing it back in line.

Most recent guess by the Fed for 5 year forward inflation
is 1.54 %.

Most recent observation for 10 year TRSY spread from effective
FFR is .54 %. Usually spreads are higher than average when
the FFR spikes to the low side. Common observations are low
spreads will continue however.

Recently learned that "5 year forward" means the 5 years that begin 5 years from now. That 1.54% appears to be just based on TIPS/nominal spreads. The 10 year TIPS vs. nominal implies 1.41% inflation, which would be a cumulative 15% over the 10 year period. The 5 year spread implies 1.28% for the first 5 years of the next 10, in order to get to 15% cumulative over the full 10, the second 5 years would need to have 1.54% inflation.

I just love formulas trying to be clairvoyant. Perhaps the 5 year breakeven inflation
rate would suffice. In any event the urban CPI has gone down this year so far thru
6-1-2020 YTD reported.

Here's a comparison of the 5 year breakeven and inflation-consumer prices:

https://fred.stlouisfed.org/graph/fredgraph.png?g=t107

[Kevin M]

And now we have the June CPI numbers. Seasonally adjusted monthly change for June was +0.57% (reported as 0.6% on BLS site, which only reports to one decimal place). This is an annualized rate of +7.00% (=(1+0.57%)^12-1), so a savings account earning 1% in June earned about -6% real.

This is misleading. The CPI increase last month was largely due to a partial recovery of the oil price since the crash in February/March (it has roughly doubled from the bottom as oil production is in the process of being adjusted to demand). These are extraordinary circumstances and you can't simply extrapolate from that to the entire year.

I did not extrapolate anything to the entire year, nor even imply that I was doing so. I simply did the math to convert a monthly rate to an annual rate, so we could compare with the annual rate of a high yield savings account, to see that the real return of the savings account was negative for that month. As discussed already, we could just as well convert the savings account annual rate to a monthly rate, and compare that to the monthly change in CPI to determine our monthly real return for that one month. We would come to the same conclusion, which is that the real return of a high-yield savings account was negative in July.

I did the same for April, for which the decrease in CPI was even larger in magnitude than the increase in July. In doing so, I also did not extrapolate that large decrease to imply anything about the entire year; i.e., I did not suggest that the -9.13% annualized change in monthly CPI in April had anything to do with the entire year. This simply shows us that the real return for a high-yield savings account earning 1% or so was quite high for that one month.

Discussion about why the 1-month CPI change was relatively large in magnitude, whether up in July or down in April, is a red herring in the context of the misunderstanding that I have been trying to correct, which is about the current real return of a high-yield savings account (which we have no way of knowing).

If we agree on the inflation number to use, for example seasonally-adjusted CPI for all urban consumers, then we can calculate the past real return for any period for which we have the savings account rates and the CPI data, whether that period is one month, six months, one year, or any other period. Typically returns are expressed as annualized percentages, but we can express them other ways if we wish, such as monthly percentages, which we did in a few replies back.

Kevin

[Eno Deb]

Discussion about why the 1-month CPI change was relatively large in magnitude, whether up in July or down in April, is a red herring in the context of the misunderstanding that I have been trying to correct, which is about the current real return of a high-yield savings account (which we have no way of knowing).

I understand the math, but an annualized inflation rate calculated from a single extraordinary month cannot be used to make a meaningful argument about the expected real return of a CD over the course of its term. I can't predict the future, but it is extremely unlikely that we'll see a 7% annual inflation rate during the term of currently offered short- to medium-term CDs.

[OAG]

I think the UP is .5% for 2020 after Jun when factored in with Jan - May. Did not the Fed say recently that they did not see rates going up for about 2 year?. It was in either the minutes or the Press Briefing of a month or two ago (too lazy to look it up).

[hudson]

at DepositAccounts.com / Lending Tree

https://www.depositaccounts.com/cd/5-year-cd-rates.html

Some credit unions look to be paying around 1.6%. It takes some research to know if they'll work for you.

[jeffyscott]

at DepositAccounts.com / Lending Tree

https://www.depositaccounts.com/cd/5-year-cd-rates.html

Some credit unions look to be paying around 1.6%. It takes some research to know if they'll work for you.

What you see varies by location, when you put in zip code or state. If you remove geographic restrictions by choosing "any" in the list of states, there are actually 28 credit unions and banks that are purportedly at 2% or higher for 5 year (not all the listings are accurate, though). OTOH, if you look at "nationwide only" then 1.65% is the highest.

That top national one, that is at 1.65%, apparently requires $50 to join the organization that would allow anyone to be a member. The second highest, at 1.60% in the national list, only requires a $3 donation, according to deposit accounts.

[Kevin M]

Discussion about why the 1-month CPI change was relatively large in magnitude, whether up in July or down in April, is a red herring in the context of the misunderstanding that I have been trying to correct, which is about the current real return of a high-yield savings account (which we have no way of knowing).

I understand the math, but an annualized inflation rate calculated from a single extraordinary month cannot be used to make a meaningful argument about the expected real return of a CD over the course of its term. I can't predict the future, but it is extremely unlikely that we'll see a 7% annual inflation rate during the term of currently offered short- to medium-term CDs.

Please quote wherever I said or even implied that any one-month inflation rate has anything to do with the expected real return of a CD over any term. I don't think you will be able to, since I never did so. I don't disagree with what you're saying about expected real return.

You seem to be ignoring the part where I also did not use the -9% annualized monthly inflation of April to extrapolate that to any future period, nor to use it to say anything about expected real returns.

Again, you are missing the context; I am agreeing with what you're saying about not being able to predict the future. Since we can't predict future inflation, we won't know the inflation for the current month until the CPI numbers are released next month. Therefore we don't know what our current real return is on a nominal investment, whether it's a CD or a savings account.

For the umpteenth time, I'm simply saying that inflation over the previous 12 months does not have anything to do with the real return we currently are earning (which we can't know), but only to the real return we earned over that (past) 12-month period. The erroneous view that we can use year over year inflation to calculate the real return we currently are earning has been stated at least twice, so I'm just trying to help people understand that that is a mistake.

By contrast, the monthly inflation in July (or May or April) is relevant to the real return we earned in that particular month. So I'm only quoting monthly inflation rates to emphasize the error of using year over year inflation to calculate our current real return.

In terms of expected real return, I'd lean toward using the breakeven inflation rate for the term of interest as expected inflation for that term. Others prefer survey data, since there are liquidity and unexpected inflation premiums embedded in the breakeven inflation rate, but since neither of these can be observed, and they affect the real yield in the opposite direction, I figure the breakeven inflation rate is good enough. For example, the current 5-year BEI rate is 1.30%, and the 10-year is 1.41% (source: https://fred.stlouisfed.org/graph/?g=t3fv).

Kevin

[JackoC]

at DepositAccounts.com / Lending Tree

https://www.depositaccounts.com/cd/5-year-cd-rates.html

Some credit unions look to be paying around 1.6%. It takes some research to know if they'll work for you.

What you see varies by location, when you put in zip code or state. If you remove geographic restrictions by choosing "any" in the list of states, there are actually 28 credit unions and banks that are purportedly at 2% or higher for 5 year (not all the listings are accurate, though). OTOH, if you look at "nationwide only" then 1.65% is the highest.

That top national one, that is at 1.65%, apparently requires $50 to join the organization that would allow anyone to be a member. The second highest, at 1.60% in the national list, only requires a $3 donation, according to deposit accounts.

Right, sometimes one person will say 'deposit account's (DA's) top rate is X' and someone else 'no it's Y!' when they are seeing different things because the search is set to where the person is.

But to amplify on your point, DA seems to have filtering which, when set to your location, *generally* shows you the best CU's you are either fairly likely to qualify to join based on where you live *or* anywhere else in the country which have basically universal access ('live or work X or Y, or join the Friends of Z Foundation for $5'), and tries to filter out the ones with restrictive geographic membership criteria outside your area. But, it's not perfect. For one thing it seems to drop small *banks* with excellent rates when not set to 'any'. For example I see what you do set on 'any': 28 non-IRA 5yr CD's >=2%, including 3 banks (Liberty Bank, Massena S/L, Asian Bank). None of those banks show up with the search set to my state or zip. Also, every once in a while a CU without a virtual universal access criterion will still have some broad criterion for membership, like being a member of a particular national civic or faith based organization. DA's filtering does not pick this up either. So set on 'any' it's 28 results >=2%, dozens above 1.60%, the great majority CU's I would not qualify to join. However it's still worth doing the search on 'any' to see possible banks, and even to click on every CU with an exceptional rate just in case I might qualify.

[jeffyscott]

For one thing it seems to drop small *banks* with excellent rates when not set to 'any'. For example I see what you do set on 'any': 28 non-IRA 5yr CD's >=2%, including 3 banks (Liberty Bank, Massena S/L, Asian Bank). None of those banks show up with the search set to my state or zip.

Some banks apparently have geographic restrictions too, which I had not known was a thing until recently.

As part of some recent rummaging around, I had asked Massena about getting a CD, they said "No I'm sorry we only service our immediate area". At that time I had also seen from comments on some other banks that there were either geographic restrictions or you had to appear in person to open an account.

For Asian, someone recently posted that you have to live in, "one of a number of counties in PA, NJ, NY and DE to qualify". viewtopic.php?f=2&t=292085&p=5364029&hi ... n#p5364029

Liberty Bank Utah info appears to be inaccurate, website shows 5 year at 1.4%: https://libertybankofutah.com/cd-rates/

[hudson]

JackoC and Jeffyscott,

Finding the best CD rates is important stuff. As you said CD search websites aren't perfect.
I'm not searching hard right now because I don't have any CDs coming due for a while.
When it's renewal time, I'll do some serious searching. In the past, I've found the answer in this discussion.
I'm hoping for more of the same.

[JackoC]

For one thing it seems to drop small *banks* with excellent rates when not set to 'any'. For example I see what you do set on 'any': 28 non-IRA 5yr CD's >=2%, including 3 banks (Liberty Bank, Massena S/L, Asian Bank). None of those banks show up with the search set to my state or zip.

Some banks apparently have geographic restrictions too, which I had not known was a thing until recently.

As part of some recent rummaging around, I had asked Massena about getting a CD, they said "No I'm sorry we only service our immediate area". At that time I had also seen from comments on some other banks that there were either geographic restrictions or you had to appear in person to open an account.

For Asian, someone recently posted that you have to live in, "one of a number of counties in PA, NJ, NY and DE to qualify". viewtopic.php?f=2&t=292085&p=5364029&hi ... n#p5364029

Liberty Bank Utah info appears to be inaccurate, website shows 5 year at 1.4%: https://libertybankofutah.com/cd-rates/

Good stuff, I figured that might be true, that is bank having geographic limitation, but had never tracked it down. But I've had various cases in actual CD shopping where I found DA's rate was not correct; it would seem inevitable with that much information presented.

On Massena, their *IRA* CD rate in 5 yrs is 3.09% which is on their website. I will need an IRA CD replacement in August and doing prelimiary recon; I figured there might be some limitation on that but hadn't called them yet. Although, back to DA filtering, Massena will show if I put 'NY' as state, and I live less than a mile from NY(C) in NJ, but I doubt Massena S&L considers NYC the local area. I've been to Massena, Eisenhower Lock on the St Lawrence Seaway. I would go again to get 3.09% But alas I doubted it even before you gave me the bad news.

Still, the filtering is imperfect enough to be worth trolling through everything I think. I found another CU at 2.17% that would apparently have let me in based on an organizational membership separate from their strict geographic area in NM. But they dropped the rate before I could confirm it meant what it appeared to.

[MikeG62]

On Massena, their *IRA* CD rate in 5 yrs is 3.09% which is on their website. I will need an IRA CD replacement in August and doing prelimiary recon; I figured there might be some limitation on that but hadn't called them yet. Although, back to DA filtering, Massena will show if I put 'NY' as state, and I live less than a mile from NY(C) in NJ, but I doubt Massena S&L considers NYC the local area. I've been to Massena, Eisenhower Lock on the St Lawrence Seaway. I would go again to get 3.09% But alas I doubted it even before you gave me the bad news.

I called Massena about one month ago as I too was willing to drive up for that rate. Sadly, they told me membership in their S&L was limited to people who live within 50 miles of their branch. So a very limited geographic area for sure.

[hudson]

as of July 19, 2020
1 Year .2%
2 Year .25%
4 Year .45%
10 Year .95%

[MikeG62]

as of July 19, 2020
1 Year .2%
2 Year .25%
4 Year .45%
10 Year .95%

It's amazing to me that anyone would invest in these brokered CD's given the rates. Would be fairly easy to get 100bps more without a lot of effort ($1,000 per year for each $100,000). Do people really put that much weight on simplicity?

[jeffyscott]

as of July 19, 2020
1 Year .2%
2 Year .25%
4 Year .45%
10 Year .95%

It's amazing to me that anyone would invest in these brokered CD's given the rates. Would be fairly easy to get 100bps more without a lot of effort ($1,000 per year for each $100,000). Do people really put that much weight on simplicity?

Treasuries are even lower as are CD rates at large banks. Chase is at 0.1% or less across the board and longest is 10 years .

I resisted direct CDs up to a point. But what I did is put money from maturing CDs in ultrashort bond funds. But then those yield dropped to the point where the simplicity was no longer worth it to me.

[hudson]

as of July 19, 2020
1 Year .2%
2 Year .25%
4 Year .45%
10 Year .95%

It's amazing to me that anyone would invest in these brokered CD's given the rates. Would be fairly easy to get 100bps more without a lot of effort ($1,000 per year for each $100,000). Do people really put that much weight on simplicity?

I agree, the best deals are at banks and credit unions.

[quisp65]

I've ran this idea out before and no one has ever biten and responded, but it's a fun topic for me to think about.

When selecting "any" for location in IRA rates at deposit rates site you come across a lot of good local deals, a lot of times out dated but maybe not always.

Rates for those who work, study, live OR worship in Eastside San Antonio.
12 month IRA CD 1.81%
24 month IRA CD 2.11%
https://bc6f9f0a-8524-4da6-b9ac-43d31d3 ... 4ec129.pdf

Online worship site I believe you can worship in East San Antonia
https://calvaryesa.com/media/
Maybe put $20 in the collection plate here for documentation purposes:
https://calvaryesa.com/giving/

So many of these local Credit Unions with great rates and one of their requirements is almost always "OR WORSHIP" and given Covid has pushed a lot of worshiping online? As a side note ....If you wanted you could find a Unitarian church online and you could say hallelujah to high certificate rates given they are open to just about any kind of spirituality ;-D

[MikeG62]

(The Asian Bank only offered two options for me to get them the funds - send them a check or wire the funds).

MikeG62,
As you know, that doesn't sound right. If it is, Asian Bank doesn't want to earn your business.
Consider calling back and see if you can get your question escalated to a higher level....or two.

Hudson, I contacted The Asian Bank again yesterday. After follow up with the branch manager they produced an IRA transfer form. So it appears they can do a custodian-to-custodian transfer (and avoid the need for reporting to the IRS). Why they are making it so painful for me to get the facts and creating a situation where I need to pull the facts out of them is beyond me. It certainly gives me the impression they are a bit of a fly by night (or not ready for prime time) operation.

They also reconfirmed that they will not lock the rate during the process - rate lock happens on the day the funds are received (no exceptions made for anyone or for any reason). Although I've encountered this (rate lock on receipt of funds policy) twice before when moving IRA funds to CU's, in both cases I had greater confidence in the ability of the CU to move expeditiously to get the funds transferred (and verbal representation from the CSR's at those CU's that when they have seen this has happen the CU honored the rate in effect upon receipt of the application).

Because this is a transfer of IRA assets, I think I am going to pass on this deal. Don't want to take the risk of the rate dropping between application and receipt of funds, as I worry about how easy it would be to move the assets back to Fidelity in the event that were to occur. After all, they don't plan to open an IRA cash or savings account (to accompany the IRA CD) - only the CD. So, would that mean I'd be breaking the CD if I did not want to move forward once the funds arrived on their doorstep and would they attempt to withhold an amount equal to the EWP? I asked this question and the CSR said they would transfer the funds back before the CD were funded, but given she's given me bad information in the past and I therefore don't have great confidence this will actually be the case if I find myself in this unfortunate position.

I have not ruled out opening their special 15-month taxable CD (rate at 1.69%). In this case, I can wire the funds once the account is approved and know I can get the funds to them within hours of sending it. No risk of days passing between initiation of process and funds arriving.

Update to my earlier post...

Opened and funded the 15-month promotional CD (APR 1.68%) yesterday. Funded by same day wire from Ally. I do not plan to pursue the IRA CD, but this one was fairly easy and no risk of the rate changing between initiating the transfer and having the funds arrive at The Asian Bank on the same day.

[hudson]

MikeG62,

It took some work, but you made it work!
Asian Bank looks like it could work for residents of the following counties surrounding Philadelphia:
(If I would have been 18 in 1956, I would have qualified)

Philadelphia Camden New Castle New York
Delaware Gloucester Bronx
Chester Burlington Queens
Montgomery Mercer West Chester
Bucks Cumberland
Lancaster Middlesex
Berks Monmouth
Lehigh
Northampton
York
Lebanon
Schuylkill
https://www.theasianbank.com/pdf/Asian% ... Online.pdf

Rates: https://www.theasianbank.com/rates.html

[MikeG62]

MikeG62,

It took some work, but you made it work!
Asian Bank looks like it could work for residents of the following counties surrounding Philadelphia:
(If I would have been 18 in 1956, I would have qualified)

Philadelphia Camden New Castle New York
Delaware Gloucester Bronx
Chester Burlington Queens
Montgomery Mercer West Chester
Bucks Cumberland
Lancaster Middlesex
Berks Monmouth
Lehigh
Northampton
York
Lebanon
Schuylkill
https://www.theasianbank.com/pdf/Asian% ... Online.pdf

Rates: https://www.theasianbank.com/rates.html

Thanks.

Here is a cleaned up version of the states and counties where residents qualify to open an account.

Philadelphia Counties:
Philadelphia
Delaware
Chester
Montgomery
Bucks
Lancaster
Berks
Lehigh
Northampton
York
Lebanon
Schuylkill

New Jersey Counties:
Camden
Gloucester
Burlington
Mercer
Cumberland
Middlesex
Monmouth

Delaware:
New Castle

New York Counties/Boroughs:
New York City
Bronx
Queens
West Chester

[gips]

thanks for the great legwork on asian bank! we opened a 2% cd.

[gips]

duplicate...

[MikeG62]

thanks for the great legwork on asian bank! we opened a 2% cd.

Great glad to hear it.

[gips]

actually, this was one of the smoothest experiences I've had opening a cd. great service, very quick response time.

[quisp65]

I'm still on a 3 year addon CD 3% at Navy Federal, but I would try this 12 month 1.97% IRA Jumbo CD if I wasn't. Wonder if you can do it remotely?

"Our membership includes employees, residents, volunteers, retirees, members and family members of the following. Which one do you belong to?"

https://www.riograndecu.org/files/riogr ... 202019.pdf


Rates effective August 13th:
https://www.riograndecu.org/rates-and-fees#savingsrates


Too good to be true right?

[sycamore]

I'm still on a 3 year addon CD 3% at Navy Federal, but I would try this 12 month 1.97% IRA Jumbo CD if I wasn't. Wonder if you can do it remotely?

"Our membership includes employees, residents, volunteers, retirees, members and family members of the following. Which one do you belong to?"

https://www.riograndecu.org/files/riogr ... 202019.pdf


Rates effective August 13th:
https://www.riograndecu.org/rates-and-fees#savingsrates


Too good to be true right?

I have no experience with them but they seem reasonable at first glance, i.e., by what I see at https://www.depositaccounts.com/banks/r ... html#rates. Only one review by a depositaccounts user and it's a stinker, but the CU is A+ rated and has good IRA rates for 1, 2, and 3 year periods. If you're eligible for membership and want to get a decent yield in an IRA it's worth looking into. Their non-IRA rates aren't as good.

[MikeG62]

I'm still on a 3 year addon CD 3% at Navy Federal, but I would try this 12 month 1.97% IRA Jumbo CD if I wasn't. Wonder if you can do it remotely?

"Our membership includes employees, residents, volunteers, retirees, members and family members of the following. Which one do you belong to?"

https://www.riograndecu.org/files/riogr ... 202019.pdf


Rates effective August 13th:
https://www.riograndecu.org/rates-and-fees#savingsrates


Too good to be true right?

I have no experience with them but they seem reasonable at first glance, i.e., by what I see at https://www.depositaccounts.com/banks/r ... html#rates. Only one review by a depositaccounts user and it's a stinker, but the CU is A+ rated and has good IRA rates for 1, 2, and 3 year periods. If you're eligible for membership and want to get a decent yield in an IRA it's worth looking into. Their non-IRA rates aren't as good.

Yup those Jumbo IRA CD rates are quite attractive in this environment. Unfortunately, I just got off the phone with them and membership is limited to their immediate area (Bernalillo County or Sandoval County, NM). There was mention about members of Catholic Parishes and even that is limited to their immediate area. Oh well.

[jeffyscott]

I am thinking of using the once a year 60 day rollover process to lock in a 2% CD, if necessary. So for a 60 day rollover, the path of the money does not matter, does it? Could I, for example, transfer mutual fund shares from an IRA brokerage account to a taxable brokerage account and then use a checking account to deposit an amount equal to the value of the mutual fund shares into an IRA as a 60 day rollover?

I have a (sort of) local bank with a 2% rate (requires an in-person visit to open), I do have a direct transfer in process but am a little worried about how long it is taking. This 18 month CD has a variable rate but a 2% minimum floor and allows additions. The rep there says she has heard nothing about a change to this floor, but there is no guarantee until the money arrives. So I thought, if I had to I could take as little as $500 from the existing IRA as a normal withdrawal and then roll it into the new IRA the same day to lock in the 2% floor. And then when the larger amount arrives it would just be added to the existing CD.

[JackoC]

People can speculate all they want about the future rate of inflation, but no one knows what it will be. Looking at something like the breakeven inflation rate (spread between nominal Treasury and TIPS yields), the market is betting that inflation will be low for many years, but the market has gotten it wrong before.
Kevin

While it is true that no one knows, the Fed does have an explicit inflation target of 2%. It seems reasonable to assume that they will take action should it be significantly out of line with that rate for a period of time with the goal of bringing it back in line.

Most recent guess by the Fed for 5 year forward inflation
is 1.54 %.

Most recent observation for 10 year TRSY spread from effective
FFR is .54 %. Usually spreads are higher than average when
the FFR spikes to the low side. Common observations are low
spreads will continue however.

Recently learned that "5 year forward" means the 5 years that begin 5 years from now. That 1.54% appears to be just based on TIPS/nominal spreads. The 10 year TIPS vs. nominal implies 1.41% inflation, which would be a cumulative 15% over the 10 year period. The 5 year spread implies 1.28% for the first 5 years of the next 10, in order to get to 15% cumulative over the full 10, the second 5 years would need to have 1.54% inflation.

The five year forward five year TIPS breakeven is used as a market/economics measure because it's supposed to filter out more noise of short term price level movements. But as I've said before, maybe even earlier on this long thread, it is not IMO the measure to use when considering a fixed income investment from now. Comparing the 10 yr nominal yield to 5x10 breakeven inflation is meaningless IMO. The correct TIPS-based comparison for a 10 yr investment from now is the 10 yr nominal yield v 10 yr TIPS yield.

TIPS breakevens have the problem, as inflation expectation measures, of also including liquidity preference differences between TIPS and nominal yields. But you don't get around that by making the comparison more apples and oranges comparing a spot 10 yr to a 5 yr 5yrs forward (5x10).

Another oft mentioned measure, Cleveland Fed's model of market inflation expectations which is not based on TIPS prices. The latest run gave 1.34% market inflation expectation for 10 yrs v 1.65% 10 yr TIPS BE 8/14 (per Treasury Daily Yield Curve), some timing difference there also.
https://www.clevelandfed.org/our-resear ... tions.aspx

Seems even more obvious for a 5 yr CD. I want to invest for 5 yrs from today, but I'll estimate the real expected return using a market measure of inflation expectations for the 5 yrs *after* the CD matures? The best albeit imperfect comparison is 5 yr TIPS BE, 1.53% 8/14.

Of course these various numbers aren't greatly different right now, and obviously we'll only find out the realized outcome when it happens.

[indexfundfan]

I am thinking of using the once a year 60 day rollover process to lock in a 2% CD, if necessary. So for a 60 day rollover, the path of the money does not matter, does it? Could I, for example, transfer mutual fund shares from an IRA brokerage account to a taxable brokerage account and then use a checking account to deposit an amount equal to the value of the mutual fund shares into an IRA as a 60 day rollover?

I have a (sort of) local bank with a 2% rate (requires an in-person visit to open), I do have a direct transfer in process but am a little worried about how long it is taking. This 18 month CD has a variable rate but a 2% minimum floor and allows additions. The rep there says she has heard nothing about a change to this floor, but there is no guarantee until the money arrives. So I thought, if I had to I could take as little as $500 from the existing IRA as a normal withdrawal and then roll it into the new IRA the same day to lock in the 2% floor. And then when the larger amount arrives it would just be added to the existing CD.

It should work. Taxes might be withheld from the distribution, if so you need to top up with your own cash.

Remember to report this on your 2020 tax return. You allowed this once in a 12-month period (NOT by calendar year).

https://www.irs.gov/retirement-plans/pl ... tributions

[Kevin M]

I am thinking of using the once a year 60 day rollover process to lock in a 2% CD, if necessary.
<snip>

It should work. Taxes might be withheld from the distribution, if so you need to top up with your own cash.

I agree that it should be fine. You should be able to specify the tax withholding as 0% (I know you can do this at Vanguard).

Remember to report this on your 2020 tax return.
<snip>

He will receive a 1099-R from the broker, so that should trigger the tax reporting. He justs need to specify the taxable amount as 0 on form 1040, and write "rollover" next to it. Tax software will handle this if he answers the questions correctly.

Kevin

[Kevin M]

<snip>
This 18 month CD has a variable rate but a 2% minimum floor and allows additions.

That's a great rate. I just had an Ally 5-year CD mature today, and just rolled it into an Ally 1-year at 0.90%. Pretty pitiful, but it's less than 1% of my direct CD holdings, so just not worth any extra effort, considering that top rates for nationally available 1-year CDs are in the 1% ballpark. For reference, Ally high-yield savings just dropped to 0.80% APY, which I believe is a bit lower than the lowest APY of 0.84% in the years following the financial crisis of 2008.

Worse than that, I still have a more significant amount from two recently matured Synchrony IRA CDs sitting in Synchrony MMA earning 0.50%.

And even worse than that, I have an even larger amount from matured brokered IRA CDs in Fidelity IRA money market funds earning 0.01%.

Waiting for a decent IRA CD deal to pop up, and/or another stock crash, in which case at least some of the Fidelity IRA money would be used to rebalance into stocks.

The rep there says she has heard nothing about a change to this floor, but there is no guarantee until the money arrives. So I thought, if I had to I could take as little as $500 from the existing IRA as a normal withdrawal and then roll it into the new IRA the same day to lock in the 2% floor. And then when the larger amount arrives it would just be added to the existing CD.

That seems like a great idea.

Kevin

[Scooter57]

Kevin M,

A lot of us who have been using CD ladders are in similar positions. I can't bring myself to fill the 5 year tier at current rates. I'm waitingmfor something good to come up but not being greedy. Marcus has 1.10% CD for AARP members, but the reviews in depositaccounts.com are so bad I passed and parked a chunk in a HYS at Live Oak Bank who are very easy to deal with.

I put half of one CD in some riskier bond funds that have done well and the other half into 9 value-y dividend stocks which have done extremely well on average since May. But this is not the bulk of !y maturing ladder for this year.

I am telling myself to be patient and preparing myself for next year when a big chunk of my ladder comes due. The intensity with which we are being pushed by politicians up the risk spectrum worries me. I keep thinking it won't end well. I live frugally and can survive without the CD interest. I don't want to lose the principal.

[jeffyscott]

I am thinking of using the once a year 60 day rollover process to lock in a 2% CD, if necessary.
<snip>

It should work. Taxes might be withheld from the distribution, if so you need to top up with your own cash.

I agree that it should be fine. You should be able to specify the tax withholding as 0% (I know you can do this at Vanguard).

Remember to report this on your 2020 tax return.
<snip>

He will receive a 1099-R from the broker, so that should trigger the tax reporting. He justs need to specify the taxable amount as 0 on form 1040, and write "rollover" next to it. Tax software will handle this if he answers the questions correctly.

Kevin

Thank you both for confirming.

If I have to resort to this, it'll be a small amount (the CD min. is only $500) so whether or not taxes are withheld won't be a big deal.

You allowed this once in a 12-month period (NOT by calendar year).

Thanks for mentioning that, I'd have assumed that it was once per tax year.

[jeffyscott]

<snip>
This 18 month CD has a variable rate but a 2% minimum floor and allows additions.

That's a great rate. I just had an Ally 5-year CD mature today, and just rolled it into an Ally 1-year at 0.90%. Pretty pitiful, but it's less than 1% of my direct CD holdings, so just not worth any extra effort, considering that top rates for nationally available 1-year CDs are in the 1% ballpark. For reference, Ally high-yield savings just dropped to 0.80% APY, which I believe is a bit lower than the lowest APY of 0.84% in the years following the financial crisis of 2008.

I was surprised to see that one pop-up and kinda lucky to stumble across it. I had not really been looking for anything that short, but one day just went through all the CD maturities at deposit accounts.

The add-on feature will be great for me, I have a lot of CDs and a few TIPS maturing during the first half of next year. So, if there is nothing better, I will at least have this through sometime in Feb. 2022. I do also have the option to roll money back into a former employer plan and invest in the stable value fund that is still at a little over 2%, but falling each month.

Unfortunately, getting even 1-2% with no risk is now a great deal. I was looking at bulletshares corporate bond ETFs the other day, just for comparison purposes not to invest, and you have to go out 4 years to the 2024 one to get an SEC yield above 1% and even the 2029 one is only at about 1.75%.

[MikeG62]

...Marcus has 1.10% CD for AARP members, but the reviews in depositaccounts.com are so bad I passed and parked a chunk in a HYS at Live Oak Bank who are very easy to deal with.

I have a number of no penalty CD's as well as an OLS account at Marcus and I have had no problems with them at all. In my view, they are just like dealing with Ally (except the CSR's at Marcus are of a somewhat higher caliber). Also, Marcus offers free wire transfers. I opened two of the special AARP 8-month CD's the other day myself. I would not let some negative reviews on DA scare you away from Marcus.

Honestly, the worst thing I can say about Marcus is that they don't issue consolidated statements. So every account I have with them is reported on its own monthly statement. Since I have 5 no penalty CD's, so this means six statement downloads per month (one for each CD and one for the OLS account). I then use Preview on my MacBook to consolidate them together.

...I was surprised to see that one pop-up and kinda lucky to stumble across it. I had not really been looking for anything that short, but one day just went through all the CD maturities at deposit accounts.

Can I ask how you qualify for membership? As I said upthread, when I called the other day I was told membership was limited to residents of the two counties in New Mexico where they have branches. I now notice it says members of Blue Cross Blue Shield, but I suspect that is BCBS of NM given my conversation with the CSR.

[Scooter57]

Does Marcus let you set up POD CDs? It sounded like they did not. I already have several Goldman Sachs brokered CDs so I would need to have beneficiaries to stay under FDIC limits.

[jeffyscott]

...I was surprised to see that one pop-up and kinda lucky to stumble across it. I had not really been looking for anything that short, but one day just went through all the CD maturities at deposit accounts.

Can I ask how you qualify for membership? As I said upthread, when I called the other day I was told membership was limited to residents of the two counties in New Mexico where they have branches. I now notice it says members of Blue Cross Blue Shield, but I suspect that is BCBS of NM given my conversation with the CSR.

The one I am working on is a bank, but serves only local customers. It requires that you come in person, not sure beyond that. Deposit accounts seems to do a pretty good job of screening by location, but you can also look at all areas by putting "any" in the location box. Then you will see a number of places with rates above 2% for various terms, but these extreme outliers are generally the more restrictive credit unions and banks that only serve local customers.

[MikeG62]

Does Marcus let you set up POD CDs? It sounded like they did not. I already have several Goldman Sachs brokered CDs so I would need to have beneficiaries to stay under FDIC limits.

Yes you can. See here:

https://www.marcus.com/us/en/faqs#beneficiaries

[MikeG62]

...I was surprised to see that one pop-up and kinda lucky to stumble across it. I had not really been looking for anything that short, but one day just went through all the CD maturities at deposit accounts.

Can I ask how you qualify for membership? As I said upthread, when I called the other day I was told membership was limited to residents of the two counties in New Mexico where they have branches. I now notice it says members of Blue Cross Blue Shield, but I suspect that is BCBS of NM given my conversation with the CSR.

The one I am working on is a bank, but serves only local customers. It requires that you come in person, not sure beyond that. Deposit accounts seems to do a pretty good job of screening by location, but you can also look at all areas by putting "any" in the location box. Then you will see a number of places with rates above 2% for various terms, but these extreme outliers are generally the more restrictive credit unions and banks that only serve local customers.

Ok thought you were opening an account at the Rio Grande CU.

Yup I’ve spent a lot of time on the DA website looking for deals. I check the site daily looking for promotions. Also have done exactly what you suggest. Sadly, it is slim pickings out there.

[hudson]

MikeG62,

Have you looked at 5 year CDs? If so what's the going rate right now?

[MikeG62]

MikeG62,

Have you looked at 5 year CDs? If so what's the going rate right now?

Yup. This past week I opened a CD ladder including a 5-year at 2.10%. Several months ago I wasn’t too interested in a 2.0% 5-year CD. However, several months of scouring the DA website has led me to conclude if I continue to wait for 2.5%-3.0%, I may be waiting for a very long time. And in the meantime my excess cash sits in places where yields keep falling and falling.

There are some very attractive local offers, but sadly all the ones I see are very limited in terms of who can participate.

Jumped on a locally available 15-month special CD with a yield of 1.7% two/three weeks ago. That offer is no longer available.

When I see something attractive I move very, very quickly to get funds in before the rate drops. I talk to parties on both sides of the transaction and do whatever I can to expedite the transfer. If the rate falls during the process it won’t be because I did not do everything within my control to get the funds in as quickly as possible. I’ve even paid a wire transfer fee where I did not want to add one more day to the process (e.g., ACH to a place where I can do free wires).

[jeffyscott]

MikeG62,

Have you looked at 5 year CDs? If so what's the going rate right now?

Yup. This past week I opened a CD ladder including a 5-year at 2.10%. Several months ago I wasn’t too interested in a 2.0% 5-year CD. However, several months of scouring the DA website has led me to conclude if I continue to wait for 2.5%-3.0%, I may be waiting for a very long time. And in the meantime my excess cash sits in places where yields keep falling and falling.

You are pretty lucky to find even 2%. I'm not checking daily or looking at the geographically unrestricted list, but since I got a 3 year at 1.9% last month, I have not seen anything better than about 1.5% for 5 years that would be available to me.

Without geographic restrictions, I see 2.8% from one credit union in NE, that's an extreme outlier, though. The unrestricted list gets pretty long at about that 1.5% level for 5 year and is very sparse at 2% or above.

[hudson]

MikeG62 and jeffyscott,
Useful information....Thanks!
When you find a deal, it does pay to make all of those contacts and expedite everything possible....or All Hands on Deck!

[atdharris]

This is not related to CD rates, but is it more advantageous to have the CD pay out monthly or does it matter? I am unclear about whether allowing the interest compound matters in CDs. I was having it payout monthly into my HYSA since interest was higher, but now that it's lower, I am unclear if I should continue that strategy.

[MikeG62]

This is not related to CD rates, but is it more advantageous to have the CD pay out monthly or does it matter? I am unclear about whether allowing the interest compound matters in CDs. I was having it payout monthly into my HYSA since interest was higher, but now that it's lower, I am unclear if I should continue that strategy.

Yield on my existing CD’s is higher than other current options (like online savings or new CD’s) so I allow interest to accumulate/compound in my CD’s.

[sosodan]

I am thinking of using the once a year 60 day rollover process to lock in a 2% CD, if necessary. So for a 60 day rollover, the path of the money does not matter, does it? Could I, for example, transfer mutual fund shares from an IRA brokerage account to a taxable brokerage account and then use a checking account to deposit an amount equal to the value of the mutual fund shares into an IRA as a 60 day rollover?

I have a (sort of) local bank with a 2% rate (requires an in-person visit to open), I do have a direct transfer in process but am a little worried about how long it is taking. This 18 month CD has a variable rate but a 2% minimum floor and allows additions. The rep there says she has heard nothing about a change to this floor, but there is no guarantee until the money arrives. So I thought, if I had to I could take as little as $500 from the existing IRA as a normal withdrawal and then roll it into the new IRA the same day to lock in the 2% floor. And then when the larger amount arrives it would just be added to the existing CD.

Be careful. It does matter what is rolled out compared to what is rolled back in within 60 days. There is a "same property" rule for 60 day rollovers, that requires just that: if you want to roll over within 60 days, it must be the same property that was distributed. So if you distribute 100 shares of xyz fund worth $5,000 at the time, then you have to roll-in 100 shares of xyz fund (regardless of the value) within 60 days. You can't roll-in $5,000 cash.

So in your case you'll want to distribute cash from the brokerage IRA (to whatever account) and then you can roll-in cash to fund the CD (from whatever account).