What To Do With Long-Term Brokered Callable Cds W/Low Interest

carolynwo | Oct 27, 2022 | 50 posts since 2017

Early during the pandemic, in order to retain some interest on my funds, I purchased several long-term (5-10 yr) callable brokered CDs. While I continued to earn interest for 2+ years, the interest rates I earn now are way below the interest rates now available on non-callable CDs. Does anyone have any tips on what to do with these callable brokered CDs since the CDs have not been called?

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Answers

w00d00w | Oct 28, 2022 | 360 posts since 2012

if you do end up selling these at a loss and they are being held in a taxable account, then you'll have a long term capital loss (since you've held these CDs for over a year). that loss can offset any taxable long term capital gains you have or ordinary income up to $3000 in one year. this tax treatment doesn't apply if CDs being held in a traditional or Roth IRA.

sams1985 | Oct 27, 2022 | 781 posts since 2022

Basically see if you can sell them on the secondary market. Figure out how much below Par value you'll receive and then calculate if the higher interest rate will off set the that loss over the long run.

Infinityy | Oct 27, 2022 | 107 posts since 2020

Not much you can do. You'll take a big loss selling them on the secondary market, plus the bid/ask spread (transaction costs) are about 1% of the face value. I'd plan to hold them until maturity.

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