CD Rates Summary October 10, 2017

Even with last Friday’s weak jobs report, we continue to be on track for a December Fed rate hike. This WSJ article sums up the September employment report and its impact on the Fed:

The Federal Reserve won’t lose any sleep over September’s hurricane-dented jobs report showing the first decline in employment in seven years.

Instead, officials are more likely to focus on other signs of an improving labor market and stay on track to raise short-term interest rates again later this year.

We may not be as fortunate next year if inflation stays low. Economist Tim Duy gave his opinion about what to expect from the Fed in December and next year in his recent Fed Watch newsletter:

December rate hike still a go; low unemployment outweighs low inflation for now. That will change next year if job growth slows further and unemployment stabilizes.

One thing that should reduce the chance of a rate-hike slowdown at the Fed is new members that are being appointed by President Trump. The President’s first appointment has just been confirmed by the Senate. Randal Quarles is the Federal Reserve’s new vice chairman for supervision. He’s on the Board of Governors, and he’ll be a permanent voting member on the FOMC. According to this NYT article:

Mr. Quarles is less likely to have an immediate influence on monetary policy, but he has criticized the Fed for trying too hard to stimulate the economy, and he is expected to favor raising interest rates more quickly.

The next big appointment by President Trump will be the new Fed Chair to replace Janet Yellen in February. According to this CNBC article, “Trump told reporters last week that he will be announcing who his pick for the next Federal Reserve chair is by the end of October.” Former Fed member, Kevin Warsh, is currently the front-runner for the position, and according to that CNBC article:

The current favorite Warsh is renowned for being very critical of current monetary policy and has reportedly criticized the Fed for being a "slave" to the stock market after years of loose policy.

The odds of a December Fed rate hike as indicated by the Fed funds futures continue to rise. They’re now at 90.6% for at least a 25-bps rate hike (up from 78% last week).

For the second straight week, all Treasury yields were up from the previous week. The largest increase this week was the 6-month Treasury bill (yield up 5 bps).

The following numbers are based on Daily Treasury Yield Curve Rates and the CME Group FedWatch.

Treasury Yields:

• 1-month: 1.03% up from 1.01% last week (0.52% on Jan 3)
• 6-month: 1.26% up from 1.21% last week (0.65% on Jan 3)
• 2--year: 1.51% up from 1.47% last week (1.22% on Jan 3)
• 5--year: 1.95% up from 1.92% last week (1.94% on Jan 3)
• 10-year: 2.35% up from 2.33% last week (2.45% on Jan 3)
• 30-year: 2.88% up from 2.87% last week (3.04% on Jan 3)

Fed funds futures' probabilities of future rate hikes by:

• Dec 2017 - up by at least 25bps: 90.6% up from 77.9% last week
• Dec 2017 - up by at least 50bps: 1.4% up from 1.2% last week
• Jun 2018 - up by at least 25bps: 96.3% up from 90.5% last week
• Jun 2018 - up by at least 50bps: 57.6% up from 47.8% last week

Certificate of Deposit Rates

The top CD rates continue to inch higher as October began, and the trend of a flattening yield curve in which short-term rates rise faster than long-term rates also continues.

The new rates at Advancial Credit Union demonstrate this flattening yield curve. Advancial’s short-term rates increased, and Advancial’s Jumbo CDs are now clear leaders for terms of 2 years and under. Advancial’s Jumbo 1-year CD rate is now 1.87% APY, which is 12 bps above the second place 1-year leader (INOVA Federal Credit Union’s new 14-month certificate, 1.75% APY). Internet banks are not far behind with recent increases at KS StateBank (1-year, 1.70% APY) and at GS Bank (1-year, 1.65% APY).

Advancial also increased its long-term rates, but these rates aren’t the highest. The best deal for mid-term CDs continues to be EBSB Direct’s 30-month CD (2.21% APY). The best long-term CD rate continues to be Mountain America Credit Union’s 60-month Term Deposit (2.60% APY).

Hot CD Deals

Update: A hot deal popped up soon after the publication of this summary. GTE Financial Credit Union is offering promotional CDs with rates up to 2.78% APY. These also have an add-on deposit option. Please see this blog post for more details.

We are starting to see a couple of hot CD deals popping up, but as is typical with hot CD deals, they don’t last long. At the start of October, we had a local deal offering 3% on a 3-year term. That deal came from the California-based 1^st United Credit Union. It was originally scheduled to last through October, but it was pulled early on October 7th.

I just noticed another hot CD deal that’s scheduled to begin on October 14th. NRL Federal Credit Union is advertising on their homepage a special 12-month CD with a 2% APY. This special is scheduled to run from October 14th to October 21st. NRL has easy membership requirements. I’ll have more info soon on this deal. Thanks to the reader who emailed me news of this special. He had found it mentioned on the new phatwalletforums.com. Update: New information that was learned about this CD revealed that it has a major limitation: a $10k maximum deposit.

Best Long-Term CDs with Mild Early Withdrawal Penalties

If you factor in the early withdrawal penalty, Utah First Credit Union continues to be the best 5-year CD deal. Its rate (2.50% APY) is just 10 bps under that of Mountain America’s 5-year CD, but the early withdrawal penalty (EWP) is just 180 days of interest (half of Mountain America’s EWP). For internet banks, Barclays is now tied with Sallie Mae Bank for the best internet bank 5-year CD when both the rate and EWP are considered. Both offer 2.35% APY and an EWP of 180 days of interest. You can see how these compare with Mountain America by using our CD Early Withdrawal Penalty Calculator. As you can see, if you break the CDs early, Utah First’s CD comes out ahead. Only Ally Bank has an advantage over Utah First, and that’s only if the CD is broken before 14 months.

Below is my standard explanation of the strategy of using long-term CDs with mild early withdrawal penalties and how I include these effective yields in the tables below.

An alternative to short-term CDs is long-term CDs that have mild early withdrawal penalties. I include the effective yields of a few long-term CDs when closed early in the tables below. All of these have competitive long-term CD rates and an early withdrawal penalty of 6 months of interest or less. The combination of a high long-term CD rate combined with a mild early withdrawal penalty makes these CDs pretty good deals even when closed early. If you want to compare the effective yields of other CDs after the early withdrawal penalties, please refer to our CD Early Withdrawal Penalty calculator.

The risks of planning for early withdrawals of long-term CDs were highlighted by the deposit agreement change at Ally. The risks have also been seen at credit unions which have raised the early withdrawal penalties on existing CDs. I have more details in this blog post.

Savings & Checking Account Rates

In the past I’ve covered savings and checking account rate changes in another weekly summary post. Each week I would publish one post with a recap of savings and checking account rate changes and another post with a recap of CD rate changes. Since there aren’t a lot of rate changes, I’m now alternating these posts. This week I’ll just publish this CD summary. Next week I’ll just publish the savings/checking summary. For both summaries I’ll include the same economic overview. Here's the link to last week's savings/checking account summary. You can always get the latest rates for savings/checking accounts and CDs by using our rate tables, available via the navigational menu on top.

Yields Accurate as of October 10, 2017

Under 1-Year CD Rates

Noteworthy Local Deals - Under 1-Year CDs

1-Year CD Rates

Noteworthy Local Deals - 1-Year CDs

18-month CD Rates

Noteworthy Local Deals - 18-Month CDs

2-Year CD Rates

Noteworthy Local Deals - 2-Year CDs

3-Year CD Rates

Noteworthy Local Deals - 3-Year CDs

4-Year CD Rates

Noteworthy Local Deals - 4-Year CDs

5-Year CD Rates

Noteworthy Local Deals - 5-Year CDs

Over 5-Year CD Rates

Noteworthy Local Deals - Over 5-year CDs

*3rd FED (Third Federal S&L), BoC (Bank of China), BoCA (Bank of California), BMOH (BMO Harris), BMW (BMW Bank), BU (BankUnited), CCB (Comenity Capital Bank), COBNA (Capital One Bank NA), COBUSA (Capital One Bank USA), EBT (Enterprise Bank & Trust), FBPR (Firstbank Puerto Rico), GSB (GS Bank), SB (Safra Bank), SYN (Synchrony Bank), TAB (Transportation Alliance Bank), WEX (Wex Bank)

CDs Removed Due To Low Rates Or Expired Specials

CDs Removed, No Longer Available - Nationwide

CDs Removed, No Longer Available - Local

CDs Removed, Rate Too Low - National

CDs Removed, Rate Too Low - Local