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Rates Of 3Yr, 4Yr & 5Yr New Issue, Non-Callable Brokered Cds Are Gradually Increasing

RichardW
  |     |   821 posts since 2019

Recently, the rates of 3-year, 4-year, and 5-year new issue, non-callable brokered CDs have gradually been increasing. As of 12:45 pm ET 9/26/2023, here are some of the new issue, non-callable brokered CDs with semi-annual interest payments which were available at Fidelity: Citibank (3-year @ 5.10%), Synchrony Bank (3-year @ 5.05%), BMW Bank (4-year @ 4.85%), and Synchrony Bank (5-year @ 4.75%).

The rates of 3-year and 5-year Treasury Notes have also been increasing recently. Treasury Notes pay interest semi-annually. As of 9/25/2023, the yield of a 3-year Treasury Note was 4.83%, and the yield of a 5-year Treasury Note was 4.62% (see: https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treas... ). Depending on your taxable income and state of residence, a 3-year or a 5-year Treasury Note could provide a higher tax-equivalent yield than a non-callable brokered CD of the same term.

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RichardW
  |     |   821 posts since 2019
Thanks to Kirkland’s post earlier today, I see the following Wells Fargo longer term, new issue, non-callable brokered CDs (3yr @ 5.15%, 4yr @ 4.90%, and 5yr @ 4.80%) are being offered today at Schwab. As of 4:30 pm ET today, I noticed they were also available at Fidelity.

I also see that the 5-year Treasury Note hit a yield of 4.72% today (see: https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=2023  Depending on your taxable income and state of residence, if you are currently thinking about purchasing a 5-year CD, you may wish to consider a 5-year Treasury Note instead. For example, according to the Taxable-Equivalent Yield Calculator available at Fidelity, if your principle state of residence is California, and your estimated taxable income is $67,000, and your federal tax filing status is single, the 5-year Treasury Note at 4.72% has a tax-equivalent yield of a 5-year CD at 5.43%. Changing the estimated taxable income to $134,000 and the federal tax filing status to married filing jointly produces the same tax-equivalent yield of a 5.43%.

The results listed above neglect local income tax and assume that the Treasury Note and the comparable CD are held in a taxable deposit account. The Taxable-Equivalent Yield Calculator available at Fidelity (https://digital.fidelity.com/prgw/digital/taxyieldcalc/) neglects NIIT (Net Investment Interest Tax), neglects AMT (Alternative Minimum Tax), and expresses yield as the effective annual rate of return in percent.
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