Non-Callable 5-Yr Brokered Cds Are Currently Offered At 5.05%, Dive In Or Wait?

SYC | Oct 24, 2023 | 312 posts since 2017

Wells Fargo, Discover Bank and State Bank of India are currently selling non-callable 5-yr brokered CDs at 5.05% on Fidelity. These are slightly higher than the ones sold in March at 5%.

Also, non-callable 4-yr brokered CDs are available 5.05%. WF is one of the three banks selling them.

Get yours now before they are gone or wait?

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Rickny | Oct 24, 2023 | 1,298 posts since 2017

As part of a ladder put some money in a 5 year at this rate and keep some powder dry if rates go up. You're never gonna have all your CDs at the highest rate.

Rickny | Oct 24, 2023 | 1,298 posts since 2017

If you have 50k you can get a 5 year CD at 5.4%. Dosen't look like an easy process.

Ltssharon | Oct 25, 2023 | 472 posts since 2020

I now think that the brokered cds do not automatically compound. The interest of 5.05 APY percent would be put , at some interval, into an account, rather than being added into the original investment. So unless you magically immediately put that interest into some magical investment that earned 5.05 percent for the rest of the 5 year term, nope you would not actually end up with 5.05 APY. Also, if you put the interest earned into a money market, remember money market interest rates change change change and are not FDIC insured. No need to take me for an expert, but this is what I have gleaned this last year.

w00d00w | Oct 26, 2023 | 360 posts since 2012

that's a good point about the lack of compounding for brokered CDs. ideally, would want to be compensated with a higher rate on the brokered CD than a standard compounded CD of similar maturities. Would help offset the risk of reinvesting brokered CD interest at lower than the initially purchased rate.

ocsteve | Oct 26, 2023 | 96 posts since 2010

One thing I like with brokered CDs are when an issue pays interest monthly, almost like getting a monthly interest check on directly held CDs at a CU or Bank. All without the hassle of having to make a deposit of the checks.

NYCDoug | Oct 27, 2023 | 335 posts since 2011

And as long as rates continue to rise, you can invest those monthly dividends to your advantage in still higher earning financial instruments (be they cash, bonds, or equities; short term, or long), without undergoing buyer's remorse. This would increase your effective yield to something greater than your initial investment of $xxx at 5.05%.

But this is only IF rates go up — a big "IF". . . Nonetheless, I guess it's nice to have the option from a reliable cushion of continually incoming cash. If you're an optimist. And an industrious one, at that :-)

w00d00w | Oct 27, 2023 | 360 posts since 2012

non-callable brokered CDs are for the most part, hassle-free. the main sticking point, from my perspective, is if it needs to be sold prior to maturity. direct CD gives certainty about what the cost of selling will be. brokered CD selling cost is uncertain, though in a falling rate environment, could potentially be sold at a gain.

Jacques321 | Oct 26, 2023 | 32 posts since 2018

A good point that I hadn't considered.

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