I’m certainly hoping for your prediction of 50% chance of long term CD ratings topping 5% in early future timeframe. Remembering folks talking about 6% CD’s, some time ago?
My last Kessler cd maturing in March or April 2023. Will have funds available then and looking for placement. :))
I got Sharonview in July so it would be great if rates were around 6% then.
I last bought a 4.9% 5-yr brokered CD (non-callable) in Nov 2022. New 5-yrs have now dropped to less than 4%.
Any thoughts on Alliant CD’s 4.6% for 47-mo? Its EWP seems reasonable: up to 180 days of interest (will not eat into your principal).
Can you open the Alliant CD and deposit the money later? If you can, how many days do they give you? Also, how do you make big deposits to your Alliant account?
I already have an account with Alliant so it is a simple matter for me to open a CD there. The CD is easily added after you are logged in. You simply transfer the funds from one of your Alliant account to the CD.
I am in the process of transferring funds to my Alliant Savings account and will open and fund the CD tomorrow. The interesting thing about the Alliant CD is that you can choose the exact maturity date you want. For example, I would avoid weekend maturity dates.
Fyi, I’m pushing money into Alliant from Fidelity. Alliant has quite a good ACH system but I can’t remember the limits off hand.
In case it wasn’t clear, from what i can see, you need the funds to be in Alliant before you can open the CD, since it is funded on the spot by an internal transfer.
I opened this a couple of months ago. Account opening is super easy, and you can specify if you want your interest each month to be reinvested or paid out. Haven’t seen much better than this 4.6% rate for a 3-4 year lockup.
Agreed. It has a lot of flexibility. This 4.6% CD can have a term ranging from 36mo to one day short of 4 years. When opening the CD, you can choose a maturity date any time between 36mo and 48mo less 1day.
So if you want a longer term CD, you can effectively consider this as a 4-yr CD.
By the way, after checking my notes, Alliant’s ACH system supports $100k pull and $25k push, both next day service. It might take a while to reach these numbers if you are a new member.
Wouldn’t it be better to wait until next week when we will know if Federal Reserve increases rate by 0.25% or 0.50%? Will also have critically important data regarding PCE inflation and current labor market conditions.
The Feds control the overnight rate so its not clear to me how it would impact the 4yr or 5yr CD rates. Also, as you probably know, the yield curve is currently inverted, and the longer term treasury rates have actually trended down after peaking last November (despite the Feds rate hike in Dec).
The other nice thing about this CD is that your early withdrawal penalty can never be larger than 180 days of interest. If say you decide to surrender after one month, your penalty is that one month’s interest only and it wouldn’t eat into your principal. You can always get your full principal back without any loss.
A 50 bps increase will affect all CD rates, although it’s highly unlikely they will do that much.
Long term rates dont seem to care where the Fed increases top out at, their only expectation is the rate wont stay at that level for long. Some solid indications (beside lip service) that rates will stay at this level for more than 12-18 months will do far more for long term rates than any size increase from the Fed.
It all depends on where inflation is going. If the trend is down like the last three months, I would agree with you. However, if it rears its ugly head again, like it did in August after a temporary pause, then I believe long-term rates will go up again. I am not making any predictions, just disabusing you of the notion that long-term rates will never follow the FFR. It has in the past and can in the future if inflation picks up.
In his latest blog post “Fed Meeting Preview …”, Ken briefly discussed his view on the longer term CD rates
"Long-term CD rates generally follow Treasury yields with similar maturities. That suggests that we may be past the peak of long-term CD rates. Top nationally-available 5-year CD rates haven’t changed much in the last six weeks. On December 7th, the top 5-year CD rate was 4.75% APY ($1.5k min at Bread Financial). Today the top 5-year CD rate is 4.78% APY ($100k min at Lafayette FCU). The 50-bp Fed rate hike on December 14th didn’t have much impact. I doubt a 25-bp Fed rate hike next week will help.
We have been seeing more 5% CD Specials, but most have terms under three years. If you’re waiting for a long-term CD with a 5%+ yield, you may miss out on 4%+ long-term CDs. If long-term CD rates follow Treasury yields, 4%+ long-term CDs may not last much longer. Non-callable 5-year brokered CD rates have already fallen below 4%.The top ones last week had a yield of only 3.90% at both Fidelity and Vanguard."
https://www.depositaccounts.com/blog/fed-deposit-interest-rate-predictions/
I still want to hold out for a 5% long term offer. But my gut is increasingly telling me I should go all-in with the 60-month 4.55% GTE offer (or similar, I just already have accounts at GTE) much sooner than later.
My large 3.3% CD that expires in 19 months, requires a new rate of about 4.4% to make paying the early withdrawal penalty worthwhile. It’s not worth the hassle to net an extra tenth of a percent, but it would also get that money locked in at 4.5% for an additional 3.5 years. I’m really concerned about what things will look like when the CD does mature in summer 2024, all indications are that it isnt going to be a good time to have a mid-6-figure balance without a home. Plus, I live off my interest income, so a 4.5% rate is a really nice “raise” over the 3.3% I have been receiving, regardless of where market rates go. I’m slowly convincing myself, but eating over $7k in EWPs is still a tough pill to swallow.
$7k EWP is hard to swallow, but at least it reduces your income by that amount.
It’s not even a loss - the new interest earned will be a net gain over the same 19-month time period, even after paying the penalty. So it’s all psychological. I’ve sent an inquiry to see if they’d waive/reduce the fee, since I’ll be keeping the funds with them. Once that is answered, I think I’ve convinced myself to do it regardless.
Is the current CD at GTE? Did they give you the EWP number or did you calculate it yourself? I see their EWP is based on the rates at the time of withdrawal so it could be more than what you calculated yourself.
It’s based on the current dividend rate being paid on that account, not the prevailing market rate. So if the rate being earned is variable (like those Keesler step-up CDs where the rate jumped every 9 months), the penalty is based on the current rate not what was earned the past 6 months. But I will make sure to confirm this before taking action.