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Morgan Stanley Bank New Issue, Non-Callable, Brokered CD Rates As Of 5-3-2023

RichardW
  |     |   821 posts since 2019

Morgan Stanley Bank, National Association (FDIC#: 32992) and Morgan Stanley Private Bank, National Association (FDIC#: 34221) have been slowly increasing the rates offered on their new issue, non-callable, brokered CDs during the last 25 days. Since the target federal funds rate was increased to 5.00% - 5.25% earlier today, perhaps we will soon see some additional increases in their shorter-term CD rates. As of today, here are the rates offered at Vanguard and TD Ameritrade for Morgan Stanley Bank and Morgan Stanley Private Bank new issue, non-callable, brokered CDs:

1-year CD @ 5.10%

18-month CD @ 4.95%

2-year CD @ 4.85%

3-year CD @ 4.65%

4-year CD @ 4.60%

5-year CD @ 4.50%

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DMC
  |     |   46 posts since 2023
RichardW, do you (or anyone else) know whether there is a meaningful difference between Morgan Stanley Bank and Morgan Stanley Private Bank? Both seem to have separate FDIC certificates so presumably are considered separate for FDIC insurance purposes. But is there any other difference that would impact one's decision to chose one bank's CD over the other's?

Also, with rates plummeting again today, these 3-5 year CDs, in particular, seem to be pretty good deals, but they're not exactly flying off the shelves. Maybe there are bank CDs that are still competitive (though there are fewer and fewer of them each day it seems), or maybe people are still dreaming of 5% (or even 6%) brokered CDs, which may never return. . .
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sams1985
  |     |   781 posts since 2022
Very surprised that long term brokered CD rates are still holding steady if not trickling slowly upwards despite the treasury yield spread. Back in November/December brokered CD's plummeted below 4% when the 5 year fell to 3.5%. Usually the spread has been 50-75 basis points until now.

 Value of my one of my brokered CD's on the secondary market is also lower now than it was in December when the treasury yields were about the same. I;m sure it has to do with the current fear of a banking crisis.I think bond investors are a little nervous. 
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DMC
  |     |   46 posts since 2023
Maybe. But it's odd. If bond investors were nervous you'd expect treasury yields to be going up not down. If there is a countervailing flight to safety effect then sure maybe the net impact is treasury yields are down. But then it's still hard to explain why (i) CD rates are remaining elevated and (ii) CDs are not being purchased as quickly as say 5% CDs were back a month or so ago when spreads to treasurys were comparable or even smaller.
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RichardW
  |     |   821 posts since 2019
DMC, you are correct, Morgan Stanley Bank, National Association (MSB) and Morgan Stanley Private Bank, National Association (MSPB) are considered as separate entities regarding FDIC insurance. One difference between the two banks is their capitalization levels. According to the most recent data (12/31/2022) from DepositAccounts.com Bank Review Health Grade Components, MSB had a capitalization level of 10.15% which was ranked as above average (B+) (see: https://www.depositaccounts.com/banks/morgan-stanley-bank-national-association.html#health) while MSPB had a capitalization level of 7.69% which was ranked as below average (C -) (see: https://www.depositaccounts.com/banks/morgan-stanley-trust.html#health). On the other hand, another difference between the two banks is their deposit growth. MSB had a deposit growth of -2.29% for the year which was ranked average (C) while MSPB had a deposit growth of 39.62% for the year which was ranked excellent (A+). However, both MSB and MSPB had the same overall Health Rating of A. Since First Republic Bank also had an overall Health Rating of A, good luck attempting to obtain a meaningful conclusion regarding this information.

(Note that the DepositAccounts.com Bank Review identifies Morgan Stanley Private Bank, National Association by one of its previous names Morgan Stanley Trust)
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txFish1
  |     |   479 posts since 2023
DMC I asked the same question to a Fixed Income rep at Fidelity and he told me MSPB was geared toward higher asset private clients and businesses while MSB was geared more toward the retail customer. Do know know if there is any truth to that info as I was never able to find anything to verify this but that is what Fidelity told me.
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DMC
  |     |   46 posts since 2023
Thanks to both of you. I found a bit more info here:

https://www.bogleheads.org/forum/viewtopic.php?t=387666

and here:

https://advisor.morganstanley.com/hamilton.clark/documents/field/p/p-/p--hamilton-clark/Safeguarding%20Your%20Deposits.pdf

But the bottom line seems to be that they use this two insured bank structure to provide extra flexibility to high net worth individuals and for cash sweep purposes in their retail operation.

And, as RichardW says, good luck distilling from all of this which is the safer option. I think, without doing a much deeper dive, it is probably fair to assume that they are both about equally safe/risky, so just stay within applicable FDIC limits at each.
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CuriousDave
  |     |   233 posts since 2018
What is the minimum CD deposit for the MSPB offerings - or, do the brokers determine that?
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txFish1
  |     |   479 posts since 2023
@CuriousDave. At Fidelity the minimum is $1000 or 1 CD. I think it is the same at Vanguard and Schwab
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Ltssharon
  |     |   472 posts since 2020
Pretty good at fidelity as well
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RichardW
  |     |   821 posts since 2019
Morgan Stanley Bank, National Association (MSB) and Morgan Stanley Private Bank, National Association (MSPB) increased the rates on two of their new issue, non-callable, brokered CDs today. The 18-month is now at 5.05%, and the 2-year CD is now at 4.90%. The rates on their other CDs remain the same as listed in my original 5/3/2023 post.

For the first time since November 2022, Capital One, National Association (FDIC#: 4297) is again offering new issue, non-callable, brokered CDs. Their rates are slightly lower than similar CDs from MSB and MSPB. Capital One is currently offering a 3-year @ 4.55%, a 4-year @ 4.50%, and a 5-year @ 4.40%.

The MSB, MSPB, and Capital One brokered CDs are currently available at Fidelity, Vanguard, and TD Ameritrade.
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sams1985
  |     |   781 posts since 2022
Interestingly enough, despite the 5 year treasury tanking massively lately and inflation trending downwards, the "market value" of my brokered CD's has also been dropping. All the 5% 60 month CD's are basically trading at Par value down from almost 101 last month. General financial uncertainty? Could also be that new issue brokered CD's are holding fairly steady. In November, 60 month CD's dropped to 3.8%
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betaguy
  |     |   181 posts since 2022
I find Morgan Stanley's dominating presence with these CDs interesting.
Being the powerhouse that MS is and being that folks (at least here) seem to think rates are going down, why would MS be selling CDs at these rates? To me, it is bullish for higher rates going forward.
Just thinking out loud.
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John19
  |     |   397 posts since 2022
I noticed BMO Harris 4.5% five year on Schwab this morning.
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RichardW
  |     |   821 posts since 2019
Morgan Stanley Bank, National Association (MSB) and Morgan Stanley Private Bank, National Association (MSPB) lowered the rates on three of their new issue, non-callable, brokered CDs today. The 5-year is now at 4.40%, the 4-year CD is now at 4.50%, and the 3-year is now at 4.60%. MSB and MSPB did raise the rate of their 1-year CD, it is now at 5.15%. The rates on their 18-month and 2-year CDs remain the same as listed in my 5/10/2023 comment. The rate of 4.45% currently offered by UBS Bank USA and American Express National Bank now exceeds MSB and MSPB in the 5-year term, and the rate of 4.55% currently offered by UBS Bank USA now exceeds MSB and MSPB in the 4-year term.

The MSB, MSPB, USB Bank USA, and American Express National Bank new issue, non-callable, brokered CDs are currently available at Vanguard, and TD Ameritrade. (The MSB, MSPB, and American Express National Bank CDs are also currently available at Fidelity. However, as of 7:00 PM ET today, the USB Bank USA CDs were not available at Fidelity.)
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sams1985
  |     |   781 posts since 2022
All of my brokered 5% 60 month CD’s fell below par value today. Not that I plan on selling them or anything but wondering what’s going on in the secondary markets ….esp in a falling rate environment
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DMC
  |     |   46 posts since 2023
My theory is that brokered CDs effectively trade like relatively illiquid bonds, and right now with debt ceiling uncertainty there's probably a lot of dislocation and increased illiquidity for brokered CDs and bonds in general. Plus, as you've noted, you can now get over 5% yield (w/ no state taxes) on 4-week T-bills! Ironically, maybe that's where all the money is going at the moment, even though that's also where much more risk than usual seems to be.
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sams1985
  |     |   781 posts since 2022
Makes sense last time FVX fell to below 35 the 5% 60 month were trading at 101+.. Maybe if this debt ceiling debacles escalates we might get some more short lived long term CD deals popping up. At these rates the the 4 week is a no brainier-the only real risk(albeit slight) i can foresee is a slight delay on getting paid.
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111
  |     |   672 posts since 2019
"All of my brokered 5% 60 month CD’s fell below par value today." That's not been my experience, unless I'm reading my data wrong. Yes mine are down relative to end of April, but nowhere near par. Examples (bought at Vanguard, from my account data today on Vanguard's website) -

- CUSIP 87165FU93, 5.0% 60-month, $102.56 as of 5/16/23.
- CUSIP 61768ERA3, 4.9% 60-month, $102.16 as of 5/16/23.
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sams1985
  |     |   781 posts since 2022
Interesting. I wonder if Fidelity just prices them differently. I own CUSIP 87165FU93, 5.0% 60-month, showing $99.993 as of 5/16/23.
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txFish1
  |     |   479 posts since 2023
@sams Fidelity does seem to price them differently as I have the exact same CUSIP as yours above and it is priced as yours is and a friend of mine has the same cusip through Schwab and his is priced well above par
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DMC
  |     |   46 posts since 2023
Are you looking at the ask or the bid?
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txFish1
  |     |   479 posts since 2023
I am looking at my account positions. Fidelity prices them daily and this is the value Fidelity shows in the account not the bid/ask when you try to sell
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DMC
  |     |   46 posts since 2023
I think that the price Fidelity displays in your positions screen is a "third-party price," which Fidelity defines as follows:

third-party price
"depicts a security's price formulated from a third-party vendor's proprietary pricing methodology; to establish this modeled price, a host of factors such as recent trade activity, size, timing, and yields of comparable bonds are used; in the case of a comparable bond, the vendor assigns a "fair market" yield to the security, then extrapolates a representative price based on the fair market yield assigned; in many cases, this modeled price provides price discovery and transparency for bonds that may not have traded for days, months, or even years; understandably, in scenarios where a security hasn't traded recently, attempting to accurately predict the "market price" can be a challenging endeavor; nevertheless, the vendor prices bonds on a daily basis

Note: Given the nature of the modeled pricing provided, it is not accurate to characterize such pricing as a "closing price" or to suggest that the price was based on specific recent (prior day's end of day) trading activity"

That sounds about as clear as mud to me. The only price you know you can get for sure is whatever the current available bid is on the secondary market. And right now those are almost certainly higher than this "third-party price". You can obviously see those prices too, but they are not the prices displayed on your main screen.

This isn't all that different than Fidelity's "indicative yield" on Treasuries. Helpful to a point, but not necessarily a reliable measure of fair market value.
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txFish1
  |     |   479 posts since 2023
DMC you are correct the price on my account positions is called a third party price and even more accurate is your decsription as clear as mud!.Example I have a 5 year non callable 4.9% monthly pay and the third party price which reflects the value on my positions page shows 99.482 which is crazy as the closest I can get on a 5 year non callable on their website today is 4.45%. Go figure
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DMC
  |     |   46 posts since 2023
Right. And I bet if you actually went to see what that CD is trading for on the secondary market (assuming there is a market right now for it, which isn’t always the case with brokered CDs) you would get bids above the third party price and likely even above par (depending on the bid ask spread).
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