Why Are Treasury Yields Sinhking

  |     |   105 posts since 2016

The markets starting to price in a recession and I guess that's why but it's very bothersome when I had been expecting yeilds for 5 year cds to start shooting up. Now is raises a question that maybe 5 year cd rates won't go up much from here. What do others think

  |     |   13 posts since 2022
I think the 5 Year CDs will continue to rise up to about 5% as they are tied in to the fed rates. The fed signaled another 0.75% increase in July and likely another 1.5-2% overall from current levels until the end of the year. Given the highest 5 year CDs yield close to 3.5% at the moment, 5% is not far off.
  |     |   21 posts since 2022
Why do you think 5 year interest rates are "tied" to the federal funds rate?
  |     |   13 posts since 2022
Maybe tied is the wrong term, but the tendency for CDs and savings to go up as the fed funds rate goes up and vice versa, certainly not a 1:1 correlation but a good indicator of percentage movement.
  |     |   21 posts since 2022
Whatever the word, why do you think the federal reserve, somehow determines 5 year interest rates?

The five-year treasury began rising in January 2021, more than a year before the Federal Reserve began raising the federal funds rate.

Since June 13, 2022, the federal reserve increased the federal funds rate by 0.75%, while the five-year treasury has fallen from 3.6% to 2.9%.
  |     |   13 posts since 2022
I’m not talking about treasury rates, rather CD rates which are bank rates, the Fed is a bank and it is a template for other banks’ borrowing and deposit rates. Take for instance Penfed which had a 5 yr CD of 1.80 back in March when the fed rate was 0.25. As of today Penfed is at 3.5 on the 5 year and the fed rate is 1.75 (increase of 1.7 and 1.5 respectively) so tracking very close.
  |     |   21 posts since 2022
Well to be pedantic. The Federal Reserve is a bank, but does not accept retail accounts. While Pentagon Federal is a Credit Union. Not a bank.

One thing about direct CDs is every bank has different needs, so there will always be outliers.  Many lower and a few higher, rates.

If you want to observe how CDs as a group actually move, in relation to the Federal Reserve, you will want to observe brokered CDs, where they are all forced to compete, in what is known as the "fixed income" market.

Anyone who "invests" in CDs should at least be aware of Treasury rates, because the only reason (most) people consider CDs safe, without even bothering to know the history of the credit union, is their Treasury guarantee.  So at least compare the rates.
  |     |   70 posts since 2021
After the last inflation report, the yields shot-up over a three week period.
Now, it's just reverting to the norm.
We'll see what happens in the next inflation report.
  |     |   103 posts since 2018
Here is one opinion today on why Treasury yields are diving
TREASURIES-U.S. Treasury yields plunge as market prices lower inflation | Nasdaq
  |     |   684 posts since 2020
If (new) business activities are flat, why do FIs need to raise capital/rates? And current CD “players” are still leaving $s at a FI resulting in no need for any capital requirements/infusions at FIs? Control what “you” can control
  |     |   70 posts since 2021
I've moved into TIPS away from CD's.
Leaving money sitting in FI's only encourages them to sit on their hands and not raise rates.
Force their hand by withdrawing the funds and putting them in Treasuries.
  |     |   812 posts since 2010
I am assuming you are only buying TIPS in a retirement account, correct?
  |     |   70 posts since 2021
In the past, yes.
In the future, I'm starting to think about it.
Paying taxes on the "phantom income" was kind of a put off.
But, losing 5% to inflation in one year is definitely worse!
  |     |   70 posts since 2021
Well, there was a huge overraction to the last inflation report because it was the highest yet.
These same folks were predicting that inflation had already peaked the month before last.
Now they're selling the same story about how inflation is under control because of the FED's interest rate hikes.
We'll see what the next inflation report says.
Even if it goes down, it's still basically out of control.
I get so tired about the "all knowing market" pricing in anything.
If it's such a great predictor, why was it shocked when the last inflation report was higher than everybody "expected".
Then it went absolutely nuts for three weeks straight.
Now it's slowly regressing back to the norm.
If the FED keeps raising interest rates, bond prices should continue to fall.
  |     |   31 posts since 2012
the long term average US inflation rate is about 3.2%. perhaps a good rule of thumb to decide when to begin buying long term CDs is when the rate clears that 3.2% hurdle, as inflation is the bogy of the saver. Treasury bond market currently estimating 5 year inflation at 2.6% (2.88% nominal 5 year minus 0.28% 5 year TIPS). first of June, that 5 year inflation estimate was 2.96%

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