Hard to justify a CD with penalty at 4.6% when a no penalty at 4.4% exists (Sallie Mae/Savebetter). Give yourself the flexibility/liquidity option and give up the 0.2%, seems like the right move.
Well, step 1 is maxing out the i-bond contribution ($10k/pp/py) if you haven't done that, before May when the new rate will certainly be lower. So, do that first for your first $10k.
Edit: ^ The above has an argument against it depending on your view of how Feb-Apr CPI will impact the inflation component of the next i-bond rates. YMMV.
You didn't miss the boat at all btw, I just think this is a good time to buy. There's a lot of laymen inflationary talk and fearmongering going on but sharp traders who actually trade bonds are already looking ahead towards deflation here, and the retail interest-bearing products are going to catch up to that sentiment imo.
Anyway, in order after i-bonds if you don't need the money for 1-2 years:
1. 27-month (a little over 2 years but still) CD posted on SD today that was at 5%
2. 12-month t-bill (~4.65% or so, NOTE: This may be #1 if you live in a high income tax state)
3. CD like the one here for 4.6%
4. No-penalty CD at SallieMae for 4.4%
I actually think the liquidity with the SallieMae CD is worth the 0.2% as I said in my first comment, for the opportunity cost alone. I would rank it ahead of this Ally CD but curated it based on what you said. You never know what could open up and this is a hedge against rates rising higher due to unforeseen wage growth or other inflationary (from a CPE perspective) components that the Fed would use to justify more hikes than anticipated/priced in. Just my 2c, but anyway, buy the ibonds first this quarter.
I think you're thinking about this correctly. A 50bp move from the current rate isn't going to make a material difference in 5y CD yields, which seem to be between 4.3% and 4.5% at the time of writing. Instead, consider what WILL drive them:
1. The dot plot released in subsequent Fed meetings where Fed members provide forward guidance on the terminal rate.
2. The Fed's forecast of core inflation through 2024 and beyond (I believe they're looking at 3.1% long-run, but I might be off on that, don't want to check right now)
3. How 2-5y yields react to the above 2 points
4. How breakevens are pricing cuts moving forward. When, for how long, and how much as well as how aggressively.
With all that in mind, and this is really more of a thought exercise from a trading perspective than for consumers holding these products to maturity, I think the current 5y CD rates will have a positive real return as early as Q3 2024. I think less so of the US 5y mostly because it's trading at 3.5%, but even then I'd probably be long the US 5y rather than short.
I'm not intimately familiar with these banks' business models but a few of these rates, at a surface level, give off an "asleep at the wheel" vibe. The short bond trade is super crowded across funds and crowded trades usually don't go well.
If I were specifically in the market for 5y CDs (I'm not) I'd be buying them now, and I think this will be close to, if not the, secular terminal rate for this cycle.
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I find the secondary market tricky. The rates on Fidelity definitely look higher than Schwab but there are no fees or so I thought. When I called Schwab they said it might be lower because there fees are already included and not listed separately as fees. For instance the best 6 months I see is 4.515% in Schwab.
Are there any fees with Fidelity?
Also, when you go to buy they charge you the prorated interest, which seems fair as long as the yield to maturity works out the same. However, when I try the math it never works out to what they say. Sometimes it's higher, sometimes it's lower. Taking it that when the Treasury matures you get the full principal and the final interest payment.
There are no fees buying or selling treasuries with Fidelity.
We almost cancel each other out. I was down 30% in 2022. Would have used you as my financial advisor :-). Ironically, as I was pulling my money, my guy said from now on I will take gains when the market goes up. Something he didn't do in 2022. Thus my lack of confidence in him. Don't want to complain to much as I still consider myself fortunate and will feel better in fixed rate securities.
Never would have thought of T-bills if not for this site. Probably bought too many brokered CDs. Thanks to the videos you posted I now realize the very limited market for the secondary market of brokered CDs so will just hold them till maturation. Now am doing a T-bill ladder. Looking to make things simple and have peace of mind and this has helped a great deal.
Peace of mind is important. Outstanding move on the T-Bill ladder. Wish I was more organized on that. Stubborn part of me thinks the market will dive and I can buy, but in reality I'm just missing opportunity not having a step-ladder in place. I was lucky. My achilles heal is not selling when I need to.
Well, step 1 is maxing out the i-bond contribution ($10k/pp/py) if you haven't done that, before May when the new rate will certainly be lower. So, do that first for your first $10k.
Edit: ^ The above has an argument against it depending on your view of how Feb-Apr CPI will impact the inflation component of the next i-bond rates. YMMV.
You didn't miss the boat at all btw, I just think this is a good time to buy. There's a lot of laymen inflationary talk and fearmongering going on but sharp traders who actually trade bonds are already looking ahead towards deflation here, and the retail interest-bearing products are going to catch up to that sentiment imo.
Anyway, in order after i-bonds if you don't need the money for 1-2 years:
1. 27-month (a little over 2 years but still) CD posted on SD today that was at 5%
2. 12-month t-bill (~4.65% or so, NOTE: This may be #1 if you live in a high income tax state)
3. CD like the one here for 4.6%
4. No-penalty CD at SallieMae for 4.4%
I actually think the liquidity with the SallieMae CD is worth the 0.2% as I said in my first comment, for the opportunity cost alone. I would rank it ahead of this Ally CD but curated it based on what you said. You never know what could open up and this is a hedge against rates rising higher due to unforeseen wage growth or other inflationary (from a CPE perspective) components that the Fed would use to justify more hikes than anticipated/priced in. Just my 2c, but anyway, buy the ibonds first this quarter.
If you're anticipating rates to go any higher, what do you think of locking rates for longer periods, like 5 years, where you can get rates iof ~4.5 apy
On the auction results page of Treasury direct they list the high rate and the interest rate. Can not find a suitable explanation of the difference. When I do the math, the actual rate seems to be in between. Anyone know what the difference is ? Thank you in advance.
Security Term 4 week
CUSIP 912796y600
IssueDate 1/24/2002
Maturity Date 02/21/2023
High Rate 4.480%
Investment Rate 4.558%
Checkout Diamond Nestegg on YouTube. T-bill helpful videos. Believe the calculation has to do with trading days.
If you're anticipating rates to go any higher, what do you think of locking rates for longer periods, like 5 years, where you can get rates iof ~4.5 apy
As a general rule of thumb, if you're expecting the fed funds rate to exceed what is already expected and priced into its corresponding assets, you'd want to park your money in shorter dated produts (1m-3m t-bills, just as one example) and once you believe the terminal rate has already been priced in (this is the hard part), then you buy the longer dated bonds or products like your 5y t-note, or whatever asset you believe will yield the best return relative to your risk appetite and illiquidity premium.
If you're of the opinion we're going higher than the 50bp hike that's already being priced (it's a bit more complex than that but for argument's sake) then you want to stay liquid so that you give yourself the best shot at a positive real not nominal return [nominal return minus inflation rate = real return]
Sorry I can't give more guidance on this. I do have my own opinion on all this that would take many more paragraphs to flesh out but it's not really my place in this thread.
On the auction results page of Treasury direct they list the high rate and the interest rate. Can not find a suitable explanation of the difference. When I do the math, the actual rate seems to be in between. Anyone know what the difference is ? Thank you in advance.
Security Term 4 week
CUSIP 912796y600
IssueDate 1/24/2002
Maturity Date 02/21/2023
High Rate 4.480%
Investment Rate 4.558%
I love Navy federal and was very excited about the 5% deal until i read this in the fine print...
Navy Federal reserves the right to end or modify this offer at any time.
Which kind of makes it seem like a callable CD, so if they can end this early if the rates drop, and I am not gauranteed the 5% for the 15 months, maybe its better I just continue with the Treasury Bill with the tax advantages
That means that they can withdraw the offer not that they can change the terms of the CD at any time.
I am in just got some money from an estate settlement (850k) ,i was looking for some safe place to park some of it . It has been terrible the past 2 years for the economy and rising inflation ....i really cant trust this government improving anytime soon .My 401k lost close to 300k in the last couple years and this is safe and a godsend ...thnx opreps for u bro.........
Last couple of years? It's only the entirety of 2022 that stunk, what the heck are you investing in?
I might be missing something here as I am new to investing in CDs but Vanguard seems to be offering a 13-month CD for higher rate (4.75%) https://investor.vanguard.com/inv...ducts/cds. Isn't this a better deal than this ALLY Bank deal?
I might be missing something here as I am new to investing in CDs but Vanguard seems to be offering a 13-month CD for higher rate (4.75%) https://investor.vanguard.com/inv...ducts/cds. Isn't this a better deal than this ALLY Bank deal?
I love Navy federal and was very excited about the 5% deal until i read this in the fine print...
Navy Federal reserves the right to end or modify this offer at any time.
Which kind of makes it seem like a callable CD, so if they can end this early if the rates drop, and I am not gauranteed the 5% for the 15 months, maybe its better I just continue with the Treasury Bill with the tax advantages
Once you get the money in they can't modify it for the duration. They can choose to end the 5% offer whenever they want (for folks who haven't signed up yet). Best to get at least $50 in now, to lock in that rate. It is a special certificate. You can keep adding to it. It is discussed in that SD thread.
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Edit: ^ The above has an argument against it depending on your view of how Feb-Apr CPI will impact the inflation component of the next i-bond rates. YMMV.
You didn't miss the boat at all btw, I just think this is a good time to buy. There's a lot of laymen inflationary talk and fearmongering going on but sharp traders who actually trade bonds are already looking ahead towards deflation here, and the retail interest-bearing products are going to catch up to that sentiment imo.
Anyway, in order after i-bonds if you don't need the money for 1-2 years:
1. 27-month (a little over 2 years but still) CD posted on SD today that was at 5%
2. 12-month t-bill (~4.65% or so, NOTE: This may be #1 if you live in a high income tax state)
3. CD like the one here for 4.6%
4. No-penalty CD at SallieMae for 4.4%
I actually think the liquidity with the SallieMae CD is worth the 0.2% as I said in my first comment, for the opportunity cost alone. I would rank it ahead of this Ally CD but curated it based on what you said. You never know what could open up and this is a hedge against rates rising higher due to unforeseen wage growth or other inflationary (from a CPE perspective) components that the Fed would use to justify more hikes than anticipated/priced in. Just my 2c, but anyway, buy the ibonds first this quarter.
1. The dot plot released in subsequent Fed meetings where Fed members provide forward guidance on the terminal rate.
2. The Fed's forecast of core inflation through 2024 and beyond (I believe they're looking at 3.1% long-run, but I might be off on that, don't want to check right now)
3. How 2-5y yields react to the above 2 points
4. How breakevens are pricing cuts moving forward. When, for how long, and how much as well as how aggressively.
With all that in mind, and this is really more of a thought exercise from a trading perspective than for consumers holding these products to maturity, I think the current 5y CD rates will have a positive real return as early as Q3 2024. I think less so of the US 5y mostly because it's trading at 3.5%, but even then I'd probably be long the US 5y rather than short.
I'm not intimately familiar with these banks' business models but a few of these rates, at a surface level, give off an "asleep at the wheel" vibe. The short bond trade is super crowded across funds and crowded trades usually don't go well.
If I were specifically in the market for 5y CDs (I'm not) I'd be buying them now, and I think this will be close to, if not the, secular terminal rate for this cycle.
Sign up for a Slickdeals account to remove this ad.
Are there any fees with Fidelity?
Also, when you go to buy they charge you the prorated interest, which seems fair as long as the yield to maturity works out the same. However, when I try the math it never works out to what they say. Sometimes it's higher, sometimes it's lower. Taking it that when the Treasury matures you get the full principal and the final interest payment.
Never would have thought of T-bills if not for this site. Probably bought too many brokered CDs. Thanks to the videos you posted I now realize the very limited market for the secondary market of brokered CDs so will just hold them till maturation. Now am doing a T-bill ladder. Looking to make things simple and have peace of mind and this has helped a great deal.
Edit: ^ The above has an argument against it depending on your view of how Feb-Apr CPI will impact the inflation component of the next i-bond rates. YMMV.
You didn't miss the boat at all btw, I just think this is a good time to buy. There's a lot of laymen inflationary talk and fearmongering going on but sharp traders who actually trade bonds are already looking ahead towards deflation here, and the retail interest-bearing products are going to catch up to that sentiment imo.
Anyway, in order after i-bonds if you don't need the money for 1-2 years:
1. 27-month (a little over 2 years but still) CD posted on SD today that was at 5%
2. 12-month t-bill (~4.65% or so, NOTE: This may be #1 if you live in a high income tax state)
3. CD like the one here for 4.6%
4. No-penalty CD at SallieMae for 4.4%
I actually think the liquidity with the SallieMae CD is worth the 0.2% as I said in my first comment, for the opportunity cost alone. I would rank it ahead of this Ally CD but curated it based on what you said. You never know what could open up and this is a hedge against rates rising higher due to unforeseen wage growth or other inflationary (from a CPE perspective) components that the Fed would use to justify more hikes than anticipated/priced in. Just my 2c, but anyway, buy the ibonds first this quarter.
If you're anticipating rates to go any higher, what do you think of locking rates for longer periods, like 5 years, where you can get rates iof ~4.5 apy
On the auction results page of Treasury direct they list the high rate and the interest rate. Can not find a suitable explanation of the difference. When I do the math, the actual rate seems to be in between. Anyone know what the difference is ? Thank you in advance.
Security Term 4 week
CUSIP 912796y600
IssueDate 1/24/2002
Maturity Date 02/21/2023
High Rate 4.480%
Investment Rate 4.558%
Checkout Diamond Nestegg on YouTube. T-bill helpful videos. Believe the calculation has to do with trading days.
If you're of the opinion we're going higher than the 50bp hike that's already being priced (it's a bit more complex than that but for argument's sake) then you want to stay liquid so that you give yourself the best shot at a positive real not nominal return [nominal return minus inflation rate = real return]
Sorry I can't give more guidance on this. I do have my own opinion on all this that would take many more paragraphs to flesh out but it's not really my place in this thread.
On the auction results page of Treasury direct they list the high rate and the interest rate. Can not find a suitable explanation of the difference. When I do the math, the actual rate seems to be in between. Anyone know what the difference is ? Thank you in advance.
Security Term 4 week
CUSIP 912796y600
IssueDate 1/24/2002
Maturity Date 02/21/2023
High Rate 4.480%
Investment Rate 4.558%
Sign up for a Slickdeals account to remove this ad.
Navy Federal reserves the right to end or modify this offer at any time.
Which kind of makes it seem like a callable CD, so if they can end this early if the rates drop, and I am not gauranteed the 5% for the 15 months, maybe its better I just continue with the Treasury Bill with the tax advantages
Don't know about the pull.
Navy Federal reserves the right to end or modify this offer at any time.
Which kind of makes it seem like a callable CD, so if they can end this early if the rates drop, and I am not gauranteed the 5% for the 15 months, maybe its better I just continue with the Treasury Bill with the tax advantages
Once you get the money in they can't modify it for the duration. They can choose to end the 5% offer whenever they want (for folks who haven't signed up yet). Best to get at least $50 in now, to lock in that rate. It is a special certificate. You can keep adding to it. It is discussed in that SD thread.
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Believe I read that the guy was a 25 yr member and they give an extra .25, but I couldn't find anything on it on their site.