Average Local Savings and CD Rates Reveal Why You Should Bank Online
The Best CD Rates in January 2019
CD Rates Summary January 15, 2019
Federal Reserve, the Economy and CD Rate Forecast - Jan 15, 2019Best Bank Account Interest Rates - Summary For January 8, 2019
This is my new weekly summary with the Fed review split off on a separate blog post. My weekly summaries will now be focused entirely on deposit rates and deals. This change was done to separate the economic and political discussion from the deal discussion. Often economic discussion leads to political discussion, and that can create lots of comments which drown out comments on deals and rates. Please keep all discussion about the Fed, the economy and politics to my Fed/Economy review blog post. Please use the comments of this blog post to discuss deposit rates and deals.
Savings and Money Market Account Rates
Below are the noteworthy savings and money market account rate changes that have occurred in the last two weeks:
- NASB High Rate Savings (new, 2.53% APY, $50k+)
- CIT Bank Savings Builder (+20 bps to 2.45% APY)
- MemoryBank Online Money Market (+10 bps to 2.40% APY)
- Marcus by Goldman Sachs 13-mo No Penalty CD (+10 bps to 2.35% APY)
- PurePoint Financial Online Savings (+20 bps to 2.35% APY, $10k+)
- USALLIANCE Financial High Dividend Savings (new, 2.30% APY)
- MutualOne Bank Online Statement Savings (+15 bps to 2.27% APY)
- Marcus by Goldman Sachs Online Savings (+20 bps to 2.25% APY)
- HSBC Direct Savings (+17 bps to 2.22% APY)
- Barclays Online Savings (+15 bps to 2.20% APY)
We have a new rate leader for nationally-available savings and money market accounts. North American Savings Bank (NASB) just introduced the High Rate Savings Account that earns 2.53% APY on balances from $50k to $5m. NASB doesn’t have much history on offering top savings account rates over the long-run. At least NASB is guaranteeing this rate for 6 months after account opening. I’ll have more on this NASB account soon.
CIT Bank moved into third place with its Savings Builder Account (2.45% APY). Customers can qualify for this rate in two ways: maintain a $25k minimum balance or by maintaining a monthly deposit of at least $100. As I mentioned in my account review, the Savings Builder Account is CIT Bank’s fifth liquid account in its product line. CIT Bank has a history of creating new accounts with top rates while leaving the old accounts stagnant.
MemoryBank moved into fourth place, tied with MySavingsDirect, with its Online Money Market Account. The rate increased to 2.40% APY, and this applies to balances up to $1m.
PurePoint Financial increased its Online Savings Account rate to 2.35% APY on balances of $10k+. This isn’t quite rate leader status, but it’s close to the leaders, and this account now has almost two years of history of very competitive rates. If you’re looking for an account with consistently high rates, and you don’t mind the $10k minimum, this Online Savings Account is something to consider.
If you’re looking for an account with consistently high rates without a minimum balance requirement, Marcus by Goldman Sachs is something to consider. It recently increased the rate of its Online Savings Account to 2.25% APY for all balances.
Competition from Money Market Funds
Another option for your cash instead of savings accounts and money market accounts are money market funds from brokerages. These don’t have FDIC coverage, but they can be reasonable alternatives to deposit accounts. Back when the Fed was holding rates near zero, money market funds had yields of around 0.01%. Keeping your cash at internet banks made a lot more sense back then. Now, it’s not so clear. Money market fund yields have been steadily rising as the Fed has been hiking rates.
Vanguard Prime Money Market Fund SEC yield continues to be over 2%. It had an increase in the last two weeks, rising from 2.40% to 2.44%. Fidelity Money Market Fund’s 7-day yield also had a nice increase. Its yield increased from 2.20% to 2.28%.
Allan Roth has a review at AARP of using money market funds to replace savings accounts. He suggests using funds such as Vanguard Federal Money Market and Vanguard Treasury Money Market instead of the Vanguard Prime Money Market Fund. The yields are slightly lower, but they are a little safer due to recent regulation changes. Treasury money market funds have an additional advantage of being exempt from state income taxes.
Municipal money market funds have the advantage of being exempt from federal income tax, but their yields continue to be quite a bit lower than the other money market funds. Vanguard Municipal Money Market Fund now has an SEC yield of 1.57%.
Reward Checking Accounts
There was just one change to my list of nationally available reward checking accounts. Superior Choice Credit Union’s AMP Checking has a new rate tier. Balances from $30k to $75k now earn 1.75% APY. Balances below $30k continue to earn 1.50% APY.
With savings and money market account rates up to 2.53% APY, it’s hard to get excited about reward checking accounts that earn 3% or less, especially when there are small balance caps. Unfortunately, most reward checking accounts have been slow in responding to the rising interest rate environment. As interest rates rise, their appeal as an online savings account alternative has been waning.
To find the highest reward checking rates and balance caps in your state or nationwide, please refer to our reward checking rate table. If you're new to reward checking, please refer to my blog post, Overview of Reward Checking and Our Reward Checking Table.
Certificate of Deposit Rates
I’m now publishing my CD survey as a separate post. Please refer to my survey of the best CD rates. This recap will focus on banking news of the week and liquid accounts.
CD Deals: I just wanted to include this reminder of a few noteworthy CD deals that are available.
Navy Federal Credit Union just introduced a new 17-month Certificate Special. It earns 3.25% APY, and it allows unlimited add-on deposits. Maximum balance is $50k. Navy Federal continues to offer a 40-month IRA CD special. This has a 3.75% APY, and it allows unlimited additional deposits for a maximum balance of $150k. Unfortunately, it’s not available as a regular CD (only an IRA CD).
For January, United States Senate Federal Credit Union increased the rate of its 60-month Jumbo CD by 6 bps to 3.69% APY. This requires a $60k minimum deposit. This CD continues to hold the top spot on the 5-year category.
INOVA Federal Credit Union came out with new CD specials just before Christmas. However, the 5-year (3.85% APY) and 6-year (4.00% APY) specials lasted less than a week, and they are no longer available. INOVA still has some very nice CD rates on shorter terms. This is especially the case for IRA CDs. The top three are its 30-month (3.50% APY), 20-month (3.40% APY) and 14-month (3.25% APY). The non-IRA CD rates are 25 bps lower: 30-month (3.25% APY), 20-month (3.15% APY) and 14-month (3.00% APY).
Andrews Federal Credit Union came out with a Black Friday CD special that is still available. It’s an 8-month CD with a 2.86% APY. It’s just a slightly better special than the 2.75% APY 9-month CD that Andrews has been offering since July.
Rates as of January 8, 2019Checking/Savings/Money Market Accounts:
- Best Savings Account Rates (Nationwide and by State)
- Best Money Market Rates (Nationwide and by State)
- Best Checking Account Rates (Nationwide and by State)
- Noteworthy Accounts Available Nationwide:
| Institution | Rates | Notes | |
|---|---|---|---|
| NASB | 2.53% ($50k-$5m) | High Rate Savings - Account review | |
| CIT Bank | 2.45% ($25k min) | Savings Builder - Account review | |
| MySavingsDirect | 2.40% | MySavings Account - Account review | |
| MemoryBank | 2.40% ($1 million max) | Online Money Market - Account review | |
| Quontic Bank | 2.40% ($100k), 2.27% ($5k), 2.00% APY (up to $5k) | Personal Money Market - Account review | |
| CIBC USA (formerly The Palladin PrivateBank) | 2.39% | Agility Savings Account - Account review | |
| Virtual Bank | 2.36% | eMoney Market Special - Account review | |
| Popular Direct | 2.36% ($5k min) Popular Direct Plus Savings (60-day freeze on new accounts, see details) | Popular Direct Plus Savings - Account review | |
| Vio Bank | 2.35% | Online High Yield Savings | |
| Marcus by Goldman Sachs | 2.35% | 13-month No Penalty CD ($500) - Account review | |
| PNC Bank | 2.35% | Online High Yield Savings (not available in all states) - Account review | |
| Bay State Savings Bank | 2.35% ($5k) | Smile Worcester County Consumer Money Market - Account review | |
| PurePoint Financial | 2.35% ($10k min) | Online Savings - Account review | |
| earn.bank | 2.31% | Money Market Account | |
| Salem Five Direct | 2.30% | eOne Savings (up to $1m), for new customers only - Account review | |
| USALLIANCE Financial | 2.30% ($500) | High Dividend Savings - Account review | |
| UFB Direct | 2.30% ($5k min) | Premium Money Market - Account review | |
| Northpointe Bank | 2.30% ($25k-$1m, guaranteed for 2 years) | Ultimate Money Market - Account review | |
| United Bank (CT) | 2.30% (6mo rate guarantee) | Advantage Money Market, not available in all states - Account review | |
| Ally Bank | 2.30% ($25k) | No-Penalty 11-month CD - Account review | |
| MutualOne Bank | 2.27% ($1m max) | Online Statement Savings - Account review | |
| Zions Bank | 2.26% ($25k min) | Online Money Market (not available in all states) - Account review | |
| Marcus by Goldman Sachs | 2.25% | High-Yield Online Savings Account - Account review | |
| Live Oak Bank | 2.25% ($5 million max) | Savings Account - Account review | |
| Citizens Access | 2.25% ($5k min) | Online Savings Account - Account review | |
| Pacific National Bank | 2.25% ($5k min) | Money Market Deposit Account - Account review | |
| Customers Bank | 2.25% ($25k min) | Ascent Money Market Savings (rate guarantee through 6/30/2019 - Account review | |
| BankPurely | 2.25% ($25k min) | PurelyMoneyMarket - Account review | |
| iGObanking.com | 2.25% ($25k min) | MMA, New accounts and new money only - Account review | |
| Northfield Bank | 2.25% ($100k max) | Online Platinum Savings - Account review | |
| All America Bank | 2.25% (up to $50k), 0.50% ($50k+) | Mega Money Market Account - Account review | |
| Redneck Bank | 2.25% (up to $50k), 0.50% ($50k+) | Mega Money Market Account | |
| CommunityWide Federal Credit Union | 2.25% (penalty-free withdrawals first 5 days of each calendar quarter) | High Rate Quarterly Funds Account - Account review | |
| Presidential Bank | 2.25% ($100k+), 1.25% ($250k+), 0.25% (less than $100k) | Money Market Plus Checking - Account review | |
| HSBC Direct | 2.22% | HSBC Direct Savings | |
| Barclays | 2.20% | Online Savings - Account review | |
| Synchrony Bank | 2.20% | High Yield Savings - Account review | |
| Sallie Mae Bank | 2.20% | Money Market Account - Account review | |
| Incredible Bank | 2.20% ($25k+), 1.21% ($2.5k), | IncredibleBank Savings - Account review | |
| TIAA Bank | 2.15% (1yr intro rate) 1.90% ($100k+) ongoing rate | Yield Pledge Money Market - Account review | |
| FNBO Direct | 2.15% | Online Savings | |
| Franklin Synergy Bank | 2.15% ($500k), 2.05% ($250k), 1.95% ($100k), 1.85% ($50k) | Synergy Money Market | |
| Discover Bank | 2.10% | Online Savings - Account review | |
| American Express National Bank | 2.10% | High Yield Savings - Account review | |
| Sallie Mae Bank | 2.10% | High Yield Savings - Account review | |
| SFGI Direct | 2.07% | SGFI Direct Savings Account - Account review | |
| Bank 7 | 2.05% ($100 min) | High Rate Online Savings Account | |
| Bank5 Connect | 2.05% ($100 min) | High Interest Savings - Account review | |
| CIT Bank | 2.05% ($1k min) | 11-month No-Penalty CD - Account review | |
| Bank 7 | 2.05% ($5k min) | High Rate Online Money Market | |
| Radius Bank | 2.05% ($25k+), 1.50% ($2.5k+) | Radius High-Yield Savings - Account review | |
| NASB | 2.02% ($25k+), 1.77% (up to $25k), 0.10% ($1.5m+) | MMA Special Online Only - Account review | |
| First Internet Bank | 2.02% ($250k+) 1.81% (up to $250k) | Money Market Savings | |
| M.Y. Safra Bank | 2.01% ($500k max) | MYSB Direct Online Money Market - Account review | |
| BankUnitedDirect | 2.01% | Online Money Market - Account review | |
| UmbrellaBank.com | 2.01% ($25k min), 1.00% ($1k) | Money Market | |
| Empower | 2.00% | Savings | |
| Ally Bank | 2.00% | Online Savings - Account review | |
| Alliant Credit Union | 2.00% ($100 min) | High-Rate Savings - Account review | |
| PenFed Credit Union | 2.00% | Premium Online Savings | |
| Chartway Federal Credit Union | 2.00% ($500) | 12-month No Penalty CD - Account review | |
| Bethpage Federal Credit Union | 2.00% ($500 min) | Money Market | |
| Capital One | 2.00% ($10k+), 0.85% (up to $10k) | 360 Money Market - Account review | |
| American Heritage Credit Union | 2.00% ($10k min) | High Yield Savings (guaranteed through 12/31/2019) | |
| Discover Bank | 2.00% ($100k min), 1.95% ($2.5k) | MMA - Account review | |
| Northpointe Bank | 1.95% ($25k+), 1.12% (below $25k and $1m+) | Ultimate Savings - Account review | |
| Self-Help Federal Credit Union | 1.91% ($500) | Money Market - Account review | |
| iGObanking.com | 1.90% | iGOsavings - Account review | |
| BankPurely | 1.90% ($1 min) | SavingPurely - Account review | |
| Colorado Federal Savings Bank | 1.90% ($50k+) | Premier Savings (New customers) - Account review | |
| CIT Bank | 1.85% ($100 min) | Money Market - Account review | |
| McGraw-Hill Federal Credit Union | 1.85% ($100) (guaranteed through 3/31/19) | S3 Prime Money Market - Account review | |
| ableBanking | 1.85% ($250 min) | Money Market Savings - Account review | |
| Spectrum Credit Union | 1.85% ($2.5k+), 0.50% ($1+) | MarketEdge Money Market | |
| MyBankingDirect | 1.85% ($25k+), 1.50% ($5k+), 0.25% (less than $5k) | Money Market | |
| DollarSavingsDirect | 1.80% | Dollar Savings Account - Account review | |
| BBVA Compass | 1.80% ($10k min, 12mo rate guarantee) | ClearChoice MMA Promo - Account review | |
| EBSB Direct | 1.80% ($10k+), 0.80% ($2m+), 0.50% ($10+) | Money Market Special 3 - Account review |
Reward Checking Accounts:
- Noteworthy Accounts Available Nationwide:
| Institution | Rates | Notes |
|---|---|---|
| Consumers Credit Union | 5.09% (up to $10k), 0.20% ($10k-$25k), 0.10% ($25k+) | Rewards Checking Tier A- debit card and $1k credit card requirements (Changes effective 10/1/18) |
| La Capitol Federal Credit Union | 4.25% (up to $3k), 2.00% ($3k-10k), 0.10% ($10k+) | Choice Checking |
| Consumers Credit Union | 4.09% (up to $10k), 0.20% ($10k-$25k), 0.10% ($25k+) | Rewards Checking Tier B- debit card and $500 credit card requirements (Changes effective 10/1/18) |
| One American Bank | 3.50% (up to $10k), 0.25% ($10k+) | Kasasa Cash - Account review |
| Heritage Bank | 3.33% (up to $25k), 0.15% ($25k+) | eCentive Account |
| Consumers Credit Union | 3.09% (up to $10k), 0.20% ($10k-$25k), 0.10% ($25k+) | Rewards Checking Tier C - debit card with NO credit card requirements (Changes effective 10/1/18) |
| Legence Bank | 3.05% (up to $10k), 0.25% ($10k+) | Kasasa Cash |
| Market USA Federal Credit Union | 3.01% (up to $15k), 0.05% ($15k+) | VIP Checking Platinum Tier - Account review |
| Evansville Teachers Federal Credit Union | 3.00% (up to $20k), 0.00% ($20k+) | Vertical Dividend Checking - Account review |
| MainStreet Bank | 3.00% (up to $15k), 0.25% ($15k+) | Kasasa Cash - Account review |
| Lake Michigan Credit Union | 3.00% (up to $15k), 0.00% ($15k+) | Max Checking |
| INOVA Federal Credit Union | 3.00% (up to $15k), 0.07% ($15k+) | Shield Checking - Account review |
| Signature Federal Credit Union | 3.00% (up to $15k), 0.10% ($15k+) | Choice Checking |
| Great Lakes Credit Union | 3.00% (up to $10k), 0.20% ($10k+) | Free Checking |
| Partner Colorado Credit Union | 3.00% (up to $10k), 0.10% ($10k+) | High Interest Checking |
| Georgia Banking Company | 2.95% (up to $25k), 1.00% ($25k+) | Kasasa Cash - Account review |
| All America Bank | 2.75% (up to $10k), 0.50% ($10k+) | Ultimate Rewards Checking |
| Redneck Bank | 2.75% (up to $10k), 0.50% ($10k+) | Redneck Rewards Checking |
| Campus Federal | 2.51% (up to $10k), 0.05% ($10k+) | Lagniappe Checking |
| The State Bank (MI) | 2.50% (up to $50k), 0.15% ($50k+) | Kasasa Cash - Account review |
| Hanscom Federal Credit Union | 2.50% ($15k min), 0.40% ($15k+) | Kasasa Cash Checking - Account review |
| Industrial Bank | 2.50% (up to $15k), 0.25% ($25k+) | Kasasa Cash |
| Altra Federal Credit Union | 2.50% (up to $15k), 0.40% ($15k+) | A+ Checking |
| New Buffalo Savings Bank | 2.27% (up to $15k), 0.2497% ($15k+) | Kasasa Cash - Account review |
| Bellco Credit Union | 2.25% (up to $25k), 0.25% ($25k+) | Boost Interest Checking - Account review |
| Main Street Bank | 2.25% (up to $25k), 0.25% ($25k+) | Kasasa Cash - Account review |
| TruStone Financial Credit Union | 2.02% (up to $20k), 0.10% ($20k+) | TruRate Checking - Account review |
| BankFirst | 2.02% (up to $10k), 0.15% ($10k+) | Kasasa Cash |
| Finex | 2.018% (up to $25k), 0.20% ($25k+) | Axcess Rewards Checking, Premier Account (formerly First New England Federal Credit Union) |
| XCEL Federal Credit Union | 2.01% (up to $25k), 0.03% ($25k+) | Kasasa Cash Checking |
| Bay State Savings Bank | 2.01% (up to $20k), 0.25% ($20k+) | Kasasa Cash - Account review |
| Hawaii Pacific Federal Credit Union | 2.00% (up to $25k), 0.25% ($25k+) | Kasasa Cash Checking |
| 5Star Bank | 2.00% (up to $25k), 0.15% ($25k+) | Kasasa Cash Checking Account review |
| Country Bank | 2.00% (up to $20k), 0.25% ($20k+) | Kasasa Cash Checking Account review |
| Elements Financial | 2.00% (up to $20k), 0.10% ($20k+) | High Interest Checking - Account review |
| First Tech Federal Credit Union | 2.00% (up to $15k), 0.20% ($15k+) | Dividend Rewards Checking |
| Blue Federal Credit Union | 2.00% (up to $15k), 0.10% ($15k+) | Extreme Checking (up to 4% w/account relationships) - Account review |
| Northwest Federal Credit Union | 2.00% (up to $15k min) | Kasasa Cash - Account review |
| United Educators Credit Union | 2.00% (up to $10k), 0.25% ($10k+) | Kasasa Cash |
| KS StateBank | 1.90% (up to $25k), 0.50% ($25k+) | Check PLUS - Account review |
| Connexus Credit Union | 1.75% (up to $25k), 0.25% ($25k+) | Xtraordinary Checking |
| Superior Choice Credit Union | 1.75% ($30k-$75k), 1.50% (up to $30k) | AMP Checking |
| Axos Bank | 1.25% (up to $150k), 0.00% ($150k+) | Rewards Checking |
Certificates of Deposit:
- Best CD Rates (Nationwide and by State)
- Best IRA CD Rates (Nationwide and by State)
- Survey of the Best CD Rates (Nationwide and Local)
Bank Account Alternatives - NOT FDIC Insured
| Institution | Rates | Notes |
|---|---|---|
| GM Financial Right Notes | 2.75% ($50k+), 2.60% ($15k+), 2.50% ($500+) | |
| Duke Energy PremierNotes | 2.65% ($50k+), 2.50% ($10k+), 2.45% (less than $10k) | Duke Energy PremierNotes review |
| Ford Interest Advantage | 2.65% ($50k+), 2.50% ($15k+), 2.45% (less than $15k) | Ford Interest Advantage review |
| Vanguard Prime Money Market Fund | 2.44% 7-day yield | |
| Fidelity Money Market Fund | 2.28% 7-day yield | |
| Ally Financial Demand Notes | 2.10% ($50k+), 1.95% ($15k+), 1.75% (less than $15k) ( | |
| Vanguard Municipal Money Market Fund | 1.57% 7-day yield | |
| Fidelity Municipal Money Market Fund | 1.41% 7-day yield |
Removed, No Longer Available
| EBSB Direct | 2.50% ($5k min) | High-Yield Statement Savings - Account review |
Removed, Rate Too Low
| Marine Federal Credit Union | 1.26% (up to $10k), 0.05% ($10k+) | Kasasa Cash Checking |
Post Publication Edits
1/9/2019: Salem Five Direct eOne Savings rate raised.
1/9/2019: Live Oak Bank Savings rate raised.
1/10/2019: EBSB Direct High-Yield Statement Savings removed.
1/10/2019: UFB Direct Premium Money Market added.
1/11/2019: Discover Bank Online Savings rate raised.
1/11/2019: Discover Bank Money Market rate raised.
This sentence from gregk sums it up "Sorry for being a member so long, Inova, and thanks for making that a distinct disqualification for receiving even the same courtesy given those who haven't supported you with their business for almost a decade as I have."
I think your quote could be simplified to "....it was almost impossible for anyone." Period
https://www.gtefinancial.org/for-members/current-offers/set-sail-savings-plus-cruise
https://www.ebsbdirect.com/
The NAVs were driving me nuts.
CD's maintain principal until maturity. A $100K brokered CD paying 5% for 10 years pays $5,000/annum interest; $100K is returned to the owner at the end of ten years. Total after 10 years is $150K minus annual taxes on interest.
I'm sure you know this so Bozo is correct: CD's don't necessarily "lose" value as rates rise. Rising inflation WILL affect the value of a matured CD. $100K in 2008 = $116K in 2018. This is why CD's are often considered a hedge against inflation and not a wealth building vehicle. FDIC insurance has a price.
Of course 3.5% is a better return than 1.5%. However, since CD's are generally considered "time deposits" we aren't concerned with trading as we are in the stock market. A $100 stock that falls to $80 has lost value. A $100 CD is $100 at maturity (plus interest payments). Ignoring inflation, the stock has lost purchasing value, the CD has not.
One obviously risks missing higher CD rates when buying long-term CD's. I recently sold two brokered 10-yr 3.3% CD's for a small loss in principal (much less than any EWP). I immediately reinvested in a stable stock paying 5.8% dividend. Last year I sold a 10-yr 3.3% for 103% of principle (made a profit on a CD sale). I also reinvested that in a dividend stock paying 5.7%. I'm not sure how one values value but I'm perfectly happy with boring CD rates and old-folk dividend paying utilities. Oh, and we cashed in a local non-IRA $250K CD at 2.5%, paid the EWP and reinvested in a brokered at 3.65%.
Regarding EWP...don't forget line 30 on your 1040.
We can discuss duration if you please but CD's are not bonds. Fixed income is easy to understand. Gibberish not so much. Your posts are light on specifics.
Have a great year!
I've sold three brokered CD's at Schwab. One year ago (1/8/18) I sold a 3.3% $50K CD due in 2024 at 2% above par (interest not included). Proceeds, including three months interest: $51,400.
Recently I sold two smaller 3.3% CD's (final amount includes interest) slightly below par. I put the proceeds in a stable stock that pays a 5.8% dividend (at current pricing).
All of these CD's were aged...most were now competing with 5-yr offerings. The one sold a year ago at a premium was prior to major rate increases. Recent sales suffered from rate increases, but that is changing. We have a lot in brokered CD's and I use the spinoff interest to purchase additional CD's or one of the dividend stocks I follow, depending, of course, on the price of the stock. The stocks are all stable utilities.
The three brokered sales on Schwab were timely and efficient. I requested a bid, received a response within an hour and accepted or rejected it. Start to finish the two most recent sales took less than 30 minutes. Again, these CD's were relatively small (15K/25K). I wanted to increase my stock position (I liked the price) and I thought transferring from a 3.3% return to 5.76% dividend was a good move. While I wait for a 10-15% stock appreciation I pick up the dividends. Anyone doing this should perform all the necessary math beforehand. The last two sales incurred a small loss (penalty) that was much lower than a normal bank EWP. If I sold other CD's we own we would incur a more substantial penalty.
You did, however, take a risk going out that long in 2014 when rates were at a generational low point. No one can foresee where rates are going to be 5 years out or even a few years. You could have been easily stuck with these CDs for 10 yrs if rates had gone to 6% (which is where they were in 2006--7) over even higher. It turned out buying brokered 10 yr CDs in 2014 was a pretty good move but it easily could have gone the other way. We all have are own criteria when buying fixed income investments. For me, however, 10 yrs is too long a period unless the rate is so much higher than what is currently out there.
Years ago after the financial crisis, the govt prohibited banks from buying bonds to trade so they could create a market for them, which had a deleterious impact on liquidity for the fixed income markets. Since I have never bought brokered CDs, I'm not sure the same dynamic applies to them. I do know from experience it does apply to individual high yield bonds.
Sometimes, the issuing company will offer to partially purchase the bonds at a premium before maturity or there may be call for a percentage of the total issuance. This will negatively affect the liquidity of the bonds because now only a fraction of the bonds are in circulation. Consequently, the bonds will no longer have a "depth of book" (meaning there are no active bids) and I will have no choice but to keep the bonds until they mature. I have requested the Fidelity bond desk if they would shop my ask price, but they claim they can't do it because the bonds lack a depth of book.
I would imagine many CDs must be fairly illiquid because they are sold in small odd lots and the dollar volume isn't sufficient for a dealer to make a market for them.
I read all your posts. I have not sold bonds; only brokered CD's. Two were from Goldman Sachs, one from Citigroup. Par values were 50K, 25K and 15K. All were 10-yr CD's purchased almost five years ago (making them roughly competitive with current 5-yr). From bid request to cash in my account: longest time was about 30 minutes; shortest was about 15 minutes.
I only commented on my experience because brokered CD's have some advantages and I like the ease of seeing everything on one screen with one point of contact (the brokerage). I've had several bank CD's over the years and it just became a management headache I did not want during retirement. I'm also planning for the eventual...end of life. When two PenFed CD's mature in 2020 all investments will be under one roof along with a local bank for direct deposit/savings/checking.
In any case, my brokered CD's were very liquid. One turned a profit while two did not. The two "losses" were but a fraction of a normal EWP and I had a happy home for the proceeds. The transactions were simple and efficient.
Did you check them daily, weekly or monthly during your holding period? What was the bid ask spread? Any idea?
Because that is the definition of liquidity.
I could have sold them at anytime during the years I held them. Yes, I checked prices during a five year time period. Easily converting an asset to cash = liquidity. I converted my holdings to cash in less than 30 minutes.
I did not and do not care about bid/ask spreads. I asked for a bid, received a bid and sold the assets. I've asked for bids, received bids and rejected bids.
You may not care about changes in the value of a CD as interest rates change, but it is a simple fact, whether you realize it or not.
I realize your purpose is to attack whatever I say. My bid/ask was zero. I accepted the bid offered. It's that simple. The value of an asset or the measure of liquidity are dynamic concepts, subject to market forces. I am fully aware of the changes in CD pricing (current market value) because I've engaged in transactions above and below par. Experentia Docet.
The definition of market liquidity is how easily one can dispose of an asset regardless of gain or loss. The bid/ask spread is an indicator of the measure of liquidity. If there was no secondary market for brokered CD's they would be considered illiquid. As my experience demonstrates, my CD's were liquid.
I hope your investments do well in 2019!
You are not being attacked, you are being corrected and educated.
Many are small quantities, callable, restricted etc. I guess I chose more "liquid" CD's to buy and...sell in a timely manner.
Enjoy!
https://investor.vanguard.com/investing/online-trading/primary-secondary-market
No problem...
Under Secondary Market/Pros (Cons are dealt with separately)
A measure of how quickly and easily an investment can be sold at a fair price and converted to cash.
My three CD's were very liquid. I guess viscosity should be applied to your examples.
"Fair Price" = Small Bid Ask Spread.
I didn't provide any examples, only provided the definition. You provided the examples. It sounds like you don't really know how liquid they were, only that they were sold with a loss less than the early termination penalty, which is not at all relevant.
In the real world gains and losses matter far more than debating the definition of liquidity. The liquidity quote from V is, "A measure of how quickly and easily an investment can be sold at a fair price and converted to cash." Their quote, not mine.
Comparing the sale of brokered CD to an equivalent local bank CD with an EWP is absolutely relevant. I can sell an aging $200k CD right now for $199K. A standard EWP of 12 months interest would result in proceeds of $194K. My math says I'd be $5,000 ahead. Let's stop playing word games and part company.
The EWP is not at all relevant to whether brokered CDs is a liquid market.
Although I still continue with my tried and true ladder approach. Purchasing only new CDs and never cashing any in before maturity, bid and ask price never concerns me.
I'm looking at my account and a few of my CD's just went green in the Gain/Loss column. New issue rates are falling.