Bank Interest Rates — when will they go up?
- travelogue
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Bank Interest Rates — when will they go up?
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%.)
(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%.)
Re: Bank Interest Rates — when will they go up?
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).
CDs are up nicely (3.2% on a 5 year today on the Vanguard site).
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Re: Bank Interest Rates — when will they go up?
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).
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).
Re: Bank Interest Rates — when will they go up?
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.
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.
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Re: Bank Interest Rates — when will they go up?
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.
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?
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.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%.)
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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Re: Bank Interest Rates — when will they go up?
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.
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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Re: Bank Interest Rates — when will they go up?
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.
Kevin
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.
Kevin
If I make a calculation error, #Cruncher probably will let me know.
- SmileyFace
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Re: Bank Interest Rates — when will they go up?
It seems to be happening slowly but surely.
gsbank just went up to 1.7% percent and synchrony recently to 1.65%.
gsbank just went up to 1.7% percent and synchrony recently to 1.65%.
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Re: Bank Interest Rates — when will they go up?
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.
It's been at 1.50% for a while, and they usually lag a bit behind Ally, etc.
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Re: Bank Interest Rates — when will they go up?
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
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
- welderwannabe
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Re: Bank Interest Rates — when will they go up?
I assume you meant a million seconds is 12 days?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 am not an investment professional, but I did stay at a Holiday Inn Express last night.
Re: Bank Interest Rates — when will they go up?
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.
Re: Bank Interest Rates — when will they go up?
Here's the entire history of APY changes on the Money Market Account.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.
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."
- ReformedSpender
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Re: Bank Interest Rates — when will they go up?
+1 agreed
Market history shows that when there's economic blue sky, future returns are low, and when the economy is on the skids, future returns are high. The best fishing is done in the most stormy waters.
Re: Bank Interest Rates — when will they go up?
Here is a niffty little tool on the market's expected fed fund rate for the next year.david1082b wrote: ↑Thu May 17, 2018 11:23 am Fed Funds rate is 1.69% https://fred.stlouisfed.org/series/FEDFUNDS
http://www.cmegroup.com/trading/interes ... -fomc.html
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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Re: Bank Interest Rates — when will they go up?
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.
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Re: Bank Interest Rates — when will they go up?
https://www.valuepenguin.com/average-sa ... rest-ratesGlockenspiel 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.
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.
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Re: Bank Interest Rates — when will they go up?
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.welderwannabe wrote: ↑Fri May 18, 2018 5:56 amI assume you meant a million seconds is 12 days?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.
DMW
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Re: Bank Interest Rates — when will they go up?
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!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.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.
Re: Bank Interest Rates — when will they go up?
Couple mentions of Ally in this thread. Do you guys find them good to deal with?
Re: Bank Interest Rates — when will they go up?
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.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?
I use them for checking, savings, bill pay, and Zelle, but keep bulk of savings and all CDs elsewhere.
Kevin
If I make a calculation error, #Cruncher probably will let me know.
- peterinjapan
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Re: Bank Interest Rates — when will they go up?
Fidelity's CDs are amazing and they have an automated ladder tool
https://www.fidelity.com/learning-cente ... cd-ladders
https://www.fidelity.com/learning-cente ... cd-ladders
Re: Bank Interest Rates — when will they go up?
The 5 year is incredible. First time I've ever seen it set up like that.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
- travelogue
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Re: Bank Interest Rates — when will they go up?
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.
Re: Bank Interest Rates — when will they go up?
I think we've shown that many of them have been moving.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.
Kevin
If I make a calculation error, #Cruncher probably will let me know.
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Re: Bank Interest Rates — when will they go up?
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
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
VT 60% / VFSUX 20% / TIPS 20%
Re: Bank Interest Rates — when will they go up?
The top end of the demand account interest has been going up with Fed Funds / short end of the curve.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%.)
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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