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Why The Banks May Keep CD Rates Low

Wednesday, June 26, 2013 - 6:13 PM
From TheStreet:
Low rates offered on CDs and a recent rise in the yields of bonds, mortgages and Treasuries that Wells Fargo characteristically holds on its balance sheet are a saving grace for the bank's profit margins that it likely won't soon choose to cede.

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4
Ken TuminKen Tumin5,441 posts since
Nov 29, 2009
Rep Points: 123,675
1. Wednesday, June 26, 2013 - 6:22 PM
Interesting article Ken. Could the future portend that Treasuries yield higher than certificates of deposit? I have not seen that for a really long time.
9
ShorebreakShorebreak2,367 posts since
Apr 6, 2010
Rep Points: 12,619
2. Wednesday, June 26, 2013 - 6:33 PM
If I remember correctly, CD rates do seem to lag Treasury yields. So when rates started to fall in 2008, Treasury yields fell quickly while CD rate cuts lagged (I remember getting a 5.25% 5yr CD at Capital One in November 2008). We may see the opposite as yields rise.
4
Ken TuminKen Tumin5,441 posts since
Nov 29, 2009
Rep Points: 123,675
3. Wednesday, June 26, 2013 - 6:56 PM
I still think low interest CDs still have a role to play.  They still pay more, although not much more, than internet savings/money market accounts.  So it may not be a bad idea to park emergency money in a long term CD with a small early withdrawal penalty until interest rates rise again. 
2
mustsavemoremustsavemore40 posts since
Jun 26, 2013
Rep Points: 121
4. Wednesday, June 26, 2013 - 7:40 PM
Re: KenBDG @ 2. Wednesday, June 26, 2013 - 6:33 PM

You must have got the same 5.25% 5yr CD at Capital One that I got in December 2008. It's my last real high yielding CD and matures in December 2015.
7
ShorebreakShorebreak2,367 posts since
Apr 6, 2010
Rep Points: 12,619
5. Wednesday, June 26, 2013 - 8:02 PM
Good for you guys.  Unfortunately it sucks for people like me who just started to make money, have debt to pay, only to see that there is no real high-yield savings anymore.  Oh well...I guess I could just get around to building an emergency fund until rates rise...
1
mustsavemoremustsavemore40 posts since
Jun 26, 2013
Rep Points: 121
6. Wednesday, June 26, 2013 - 11:18 PM
Re: KenBDG @ 2. Wednesday, June 26, 2013 - 6:33 PM

You must have got the same 5.25% 5yr CD at Capital One that I got in December 2008. It's my last real high yielding CD and matures in December 2015.
Shorebreak, I think you mean December 2013. Are you engaging in wishful thinking? :)
2
loulou521 posts since
Aug 3, 2010
Rep Points: 3,239
7. Thursday, June 27, 2013 - 7:23 AM
Re: lou @ 6. Wednesday, June 26, 2013 - 11:18 PM

"Shorebreak, I think you mean December 2013. Are you engaging in wishful thinking? :)"

Oops! It's a term of 84 months (7 years) that was issued on 12/18/2008 and matures 12/18/2015. The yield is 5.25%.

Thanks for catching that lou. The "wishful thinking" is only if I had more funds at the time to put into that account.
6
ShorebreakShorebreak2,367 posts since
Apr 6, 2010
Rep Points: 12,619
8. Thursday, June 27, 2013 - 11:38 AM
Okay, now I am jealous. I bought 5.25% 5 year CDs at a local bank in Dec 2008. I wish I had chosen the 7 year CDs at Capital One. In those days I never thought about going longer than 5 years. It didn't occur to me that the Fed zero interest rate policy (ZIRP) would have lasted this long. It's hard to believe we are still stuck with these rates five years later.
5
loulou521 posts since
Aug 3, 2010
Rep Points: 3,239
9. Friday, June 28, 2013 - 10:57 AM
Okay, now I am jealous. I bought 5.25% 5 year CDs at a local bank in Dec 2008. I wish I had chosen the 7 year CDs at Capital One."

 

I also got a 5.25% 7-year CD from Capital One at exactly the same time. It matures on 12/17/2015. I guess you're going to be envious of me, too! Don't feel too bad, after my OnBank CD matures on 7/9/2013, my Capital One CD will be the only one I have left.

2
WilWil242 posts since
Feb 26, 2010
Rep Points: 1,281
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