Beginning Of The End For Long-Term CD Rates?

CDmanFL | Nov 18, 2023 | 286 posts since 2019

With the recent drop in yields, I’m wondering if we have passed the peak of this rate cycle and if rates will start trending lower. That’s my fearful guess. But I hope that I’m wrong and this is just a temporary softening and long-term rates will rise again. If the current trend continues, 5 year CDs at 5%+ may be a distant memory very soon, which would be terrible for me because I have a bunch of CDs maturing in the next 2 to 4 months. Anyone care to look into their crystal ball and share their prognostications?

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Answers

JeffinEasternFL | Nov 18, 2023 | 744 posts since 2020

I've got a 5-year jumbo @ 3% coming due in August '24 as well (EWP was to high to make it worthwhile to break and redeposit at a higher rate elsewhere, so I strip the interest quarterly and move it to my MBoI MMkt at 5% APY) and a 2 year Jumbo (at 5% w/ Raisin) in early '25..Guess ya just gotta keep laddering and hoping. Holding cash was ok with the liquid rates this year but, it's probably time to "lock, ladder and load" if one hasn't already. I managed to start late last year laddering through the spring and got 4 jumbos one maturing each CY 25-28 all at 5% or greater. The statement have brought me a smile EVERY month of 2023! (about $4,500~ a month interest!)

fliegeroh | Nov 18, 2023 | 116 posts since 2022

Yes, I think that the indications are strong that the peak is now, so you should think about looking for the best longer rates you can find and lock in some longer term CDs. I've been watching it closely and the thing that convinces me is that financial institutions are ratcheting down on their longer terms and even their shorter term CD's almost every day.

sams1985 | Nov 19, 2023 | 781 posts since 2022

Well there has been speculation that we are at the end of the rate hike cycle and rates typically fall off a cliff soon afterwards.

Except nothing has been typical for this cycle so ill take the contrarian pov. I think inflation spikes up once more before it’s all done. I thought spending would slow down after student loan payments resumed and credit cards were maxed out but it hasn’t. Maybe it’s all this extra interest income we’re all rolling in.

milty | Nov 18, 2023 | 1,672 posts since 2018

Regarding the fed rates in 2024, here's some recent forecasts:
"The UBS strategists forecast rates to fall to between 2.5% and 2.75% by the end of the year, with the so-called terminal rate plunging to 1.25% by early 2025."
Whereas two others are predicting a slower, but still downward spiral:
"Morgan Stanley also anticipates deeper cuts than the Fed. Researchers led by chief US economist Ellen Zentner see rate cuts starting in June 2024, then again in September and every meeting from the fourth quarter onward, each in 25-basis point increments, according to their 2024 outlook published on Sunday. That will take the policy rate down to 2.375% by the end of 2025, they said.
Goldman Sachs, meanwhile, sees the first 25-basis-point reduction in the fourth quarter of 2024, followed by one cut per quarter through mid-2026 — a total of 1.75 percentage points, with rates settling at a 3.5%-3.75% target range."
https://www.bloomberg.com/news/articles/2023-11-13/goldman-sachs-morgan-stanley-diverge-on-fed-rate-cut-forecasts

My "gut feeling" is that the fed rates should stay stable into at least the 1st quarter of 2024, but after that who knows. A lot can happen between now and tomorrow, but am starting to look into building my ladder now.

w00d00w | Nov 18, 2023 | 360 posts since 2012

Fed nowcasting tools providing no impetus for higher savings rates with another flat November for CPI inflation and a 4th quarter GDP of 2%, less than half of Q3.

https://www.clevelandfed.org/indicators-and-data/inflation-nowcasting
https://www.atlantafed.org/cqer/research/gdpnow

betaguy | Nov 18, 2023 | 180 posts since 2022

https://www.usdebtclock.org

Rightdx | Nov 20, 2023 | 43 posts since 2022

Agree. With out of control deficit spending and record debt of $41 Trillion ($41,000,000,000,000.00) projected by 2026, it's hard to see inflation down to 2% any time soon. So for now, I am laddering 17 week T-bills and seeking inflation protection with I-bonds and 5 yr TIPS.

Demay | Nov 18, 2023 | 29 posts since 2018

How about not pushing this theory, and helping to push this to the banks ears!

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