Treasury Yields Inching Back Up After Last Week's Crash.

sams1985 | Nov 22, 2022 | 781 posts since 2022

Could this be the return of brokered 4/5 year CD's potentially? My 4.3% capital one 5 year CD (Cusip 14042RUR0) also had a significant market value drop of .22 cents after rising all last week(valued at 97.392).

I think the biggest question on everyone's mind right now is whether to wait or lock something in between 4-4.5%. Curious to hear everyone's plan moving forward.

Post an answer

Answers

Kaight | Nov 22, 2022 | 1,192 posts since 2011

Keeping powder dry for now. Certainly might later regret so doing. No way to know.

The Ford/Carter inflation lasted for years. This current one might still have legs. Watch the railroad workers' threatened strike. Observe whether or not Congress is forced to intervene. Or will the workers instead settle now while future inflation remains an unknown?

There are lots of tells out there. You have to take them all in and assemble the mosaic as best you're able.

lou | Nov 22, 2022 | 1,004 posts since 2010

Agree with Kaight. The Fed doesn't think inflation is under control yet. The services component which is tied to wage increases is still worrisome and the Fed is not going to stop increasing rates until they see better data there. There will be a 50 basis points move in Dec and at least another 25% in Jan

sams1985 | Nov 22, 2022 | 781 posts since 2022

I'm in agreement with both of you, but the counterpoint and elephant in the room as a few DA readers have pointed out - The yield curve has started to invert and therefore irregardless of future rate hikes, there likely wont be any any more 5%+ 4/5 year CD's (unless this reverses).

I know this is not an apples/apples comparison but didn't CD rates shoot up in the early 80's despite the yield curve inverting? Or was that for short term CD's only? Can't seem to find the data.

lou | Nov 22, 2022 | 1,004 posts since 2010

The yield curve will not invert that much. The early 1980's was probably unique. Rates hit 18% at one point. You could buy long term treasuries close to that.
You will not find any point in the last thirty years where there hasn't been long term CDs at least as high as liquid savings rates.

John19 | Nov 22, 2022 | 395 posts since 2022

I wouldn't lock in everything just yet, I doubt 5 year direct CDs will drop any while they're still doing 50 point hikes. You should be able to get 4.5%+ for at lot longer. The December report will dictate where rates go. But I might worry if Sallie Mae/Bread/Capitol One and other big online banks start dropping their 5 year rates.

Listedguru | Nov 22, 2022 | 63 posts since 2022

I'm in the same boat here. My number was 4.5% for a 5+ year CD with hopes of getting 5% on the same terms. Basically I have quite a few options right now to get 4.5% but I keep going back and forth whether to hold out for 5% or not.

The fed speak has been hawkish since the Sept CPI#'s but I just worry that the economy is really weakening under the surface and the fed might cave. We do have some big data points over the next month that will be really telling in my eyes:

Wed (tomorrow) we have the Fed minutes getting released which should be interesting.

Jay Powell is speaking at the Heritage Club on Nov 30th just a few days before the fed's blackout period for their meeting and one day before the PCE gets released.

Dec 1st bring the release of the feds preferred inflation gage the PCE

Dec 13th the CPI for Nov gets released.

Dec 13th and 14th is the Fed meeting with the rate announcement on Dec14.

Dec 14th bring the Jay Powell presser which should contain some fireworks.

So I think by mid December we'll have a pretty decent idea of where things stand (maybe, lol) with regards to where rates might be heading. I'm sure we'll see 50bps of tightening in Dec and maybe 2 or 2 .25bps hikes in 2023. So probably anywhere from 50bps to 125bps of additional tightening from where we are at today. The question is will this tightening move the needle much for 5+ year cd's?

I'm thinking if we get one more night pop in 5 year cd rates I will probably jump in. I really don't want to miss the boat if things go south quickly. If the PCE and CPI numbers come in softer than expected that could spell trouble for cd rates no matter if the fed keeps raising after that (IMHO).

CDsuckers | Nov 24, 2022 | 70 posts since 2022

Actually, the CD rates were greater than the inflation rate back in the 80's.
Even during ZIRP and QE, CD rates were a tad higher than the inflation rate.
If the FED was really serious about getting inflation down, it should be higher now.
Not the huge losses to inflation that we've seen the last two years.
They need to crush the market speculators and make it attractive to save, not spend.
The DOW went from 8K to 36K, it's back up to 34K.
That mean's it's up over 4X in 15 years.
The FED needs to deflate that balloon to get inflation under control.

rockies | Nov 22, 2022 | 295 posts since 2018

I am going to run the risk of getting a bit philosophical here.

I have absolutely no idea where rates are going......and, neither does the Fed (remember "transitory"?)

So, given that nobody knows where rates are going, the only reasonable choice seems to be to ladder into this. And, hopefully, most of us have an existing ladder of some sort that matures at multiple points in the future and will enable us to keep laddering in. This guarantees (with 100% probability, I might add) that we will not buy at the top and we will not buy at the bottom. To me, this is all we can hope for when rates and the world around us are changing so rapidly.

My latest example. In the last two weeks, I terminated an IRA CD at a bank, paid the early withdrawal penalty and initiated a transfer to my Fidelity IRA with the intent of investing in 5yr/5% brokered CD's. The brokered CD's vanished. So, mid-stream, I canceled the Fidelity transfer and redirected to KS StateBank. I only got the higher rates here at the very last minute before they, too, vanished. It is the best I could do for now....and that's all I can do.

I could be a genius....if rates fall from here.
I could be a dope....if rates soar from here.

Nobody knows. Nobody.

lou | Nov 22, 2022 | 1,004 posts since 2010

Guys and girls, this is not that hard. Today, the Fed Funds rates is 3.75 to 4% and there are plenty of CDs with rates in excess of 4%. If the Fed Funds rate goes to 5%, you don't think there will be CDs higher than 5%? Every single Fed official is telling you they are going to raise the rate to 5%.

Robb | Nov 22, 2022 | 322 posts since 2018

Celtic Bank has a 9 year non callable brokerage CD at 5.2% currently. Also, an 11 year non callable at 5.25%. Anyone going out that far?

rockies | Nov 23, 2022 | 295 posts since 2018

@Robb
May I ask where you are seeing the 9 year and 11 year Celtic CD's? I do not see at Fidelity or Vanguard. Thanks,

sams1985 | Nov 23, 2022 | 781 posts since 2022

Fed minutes take away def confirms more hikes (even though they will be smaller)

CDsuckers | Nov 24, 2022 | 70 posts since 2022

Since the TIPS yields went positive earlier in the year, I've been converted maturing CD's to TIPS.
At the beginning the yields were so low that it was just a pure inflation protection play.
So, I've been nibbling away with whatever available cash that I have as yields have increased.
Last week, I purchased some 5 year TIPS with a yields of 1.8% (plus future inflation).
There haven't been TIPS yields this high since before the market crash of 2008.
In my situation, I don't need to maximize growth, I just need to preserve capital.
However, the TIPS gambit has the same problem as CD's.
When to pull the trigger.
I just ladder into it by purchasing a little bit each week.
With a little luck my TIPS will average-out over 1% (plus whatever inflation is).
It now only depends on what the FED does, it also depends on the market irrational beliefs.
What I'd like to see is the FED stick it to the speculators by doing another 0.75% increase.
However, I seriously doubt that will happen unless inflation ticks up again beyond "expectations".
Not reality, but expectations.
Heck, last month was up 0.4%.
Considering the previous 3 months were 0%, 0% and 0.4%, that's hardly great.
But, the market's been having a party over it.

lou | Nov 24, 2022 | 1,004 posts since 2010

CDsuckers, I understand the appeal of TIPS but what stops me is the uncertainty of inflation over the next 5 years. If the Fed eventually gets it down to 2% a year from now, buying CDs the next few months will be the better option. Of course, you have indicated you don't care about maximizing yield but for most of us that is still the defining criterion for our investment decisions

CDearner | Nov 23, 2022 | 7 posts since 2021

Started laddering in the last 2 weeks with 3,4,5 year 4.9 to 5 % brokered cds and a 5 year CU cd. Have a little left in case rates go up over 5%.. The inversion plus the sudden scarcity of 5% 5 year brokerage cds motivated me to buy some now. Who knows if 5 year rates will get over 5%.
5% was good enough for me since I cashed out some cds under 2% early and ate the penalty just to buy these. I bet they get over 5% but wanted to lock some in now just in case.

The financial institution, product, and APY (Annual Percentage Yield) data displayed on this website is gathered from various sources and may not reflect all of the offers available in your region. Although we strive to provide the most accurate data possible, we cannot guarantee its accuracy. The content displayed is for general information purposes only; always verify account details and availability with the financial institution before opening an account. Contact [email protected] to report inaccurate info or to request offers be included in this website. We are not affiliated with the financial institutions included in this website.