Help On Selling Brokered CD.

Steve58 | Dec 20, 2023 | 459 posts since 2018

I have 2 brokered CDs, and am considering selling one of them to get one more bite at the ADVANCIAL 60 month CD before end of the year. I have never sold a brokered CD. So not sure how much money I will get for it. It is in a Merrill account.

The Details on the sell form on Merrill:

2 year non callable CD, Coupon rate: 4.250%

CD BMO HARRIS BANK NA 05600XJN1

Interest paid semiannually

Maturity date: 9/30/2024

Bid price: 98.833

Yield to worst: 5.801%

Settlement Date 12/22/2023

Accrued interest: $483.20

Quantity: $50,000

Estimated Order Amount $49,899

Is this a good deal, since I don/ think a good 60 month CD rate will be available in 10 months?

Is the amount I would get = $49,899 on the settlement date? Do I get the accrued interest separately, or is that included in the $49,899, or does the new owner get it. Will the order go through by the settlement date? Would the accrued interest be paid to me on the settlement date, or at the semi-annual payment date?

How come the yield to worst is so high?

Thanks, Steve

1

txFish1 | Dec 20, 2023 | 479 posts since 2023

Steve58 You would receive 50 x 98.833 + $483.20 which is a total of $49,899 upon settlement which is normally 2 days or at least it is 2 days a Fidelity

5

JeffinEasternFL | Dec 20, 2023 | 744 posts since 2020

OPEN the NEW CD FIRST (to be sure you are accepted) at Advancial THEN sell the existing brokered CD...

5

Steve58 | Dec 20, 2023 | 459 posts since 2018

I became a member of ADVANCIAL a few months ago. I have purchased 2 CDs at this rate from them, and would like one more for my three 5 year ladders. Maybe I am being impatient, but my hunch is long term CD market is headed back down, and the only way to cash in on the recent high rates, is to purchase at banks/CU which are slower to react.

1

jcb194 | Dec 20, 2023 | 10 posts since 2011

My understanding is that this is a low bid. The offer is price of 98.833, equivalent to a yield of 5.801 to the BUYER. Assuming current market rates for 2 year CDs are 4.50, you should be offered a higher price (lower equivalent yield to the BUYER). If market rates were just .25 lower at 4.25, price should be 100 since the coupon is 4.25. The estimated order amount to seller at settlement appears to be 98.833 (price) /100 x 50,000 (par) = 49,416 + 483 (accrued interest) = 49,899. Settlement is also Fri 12/22, so no interest over the 3 day Christmas weekend in cash.

3

Steve58 | Dec 20, 2023 | 459 posts since 2018

TX Fish, and jcb,
Thanks for the quick reply, and details. Not having done it before, i was hesitant, so appreciate your help immensely. Love this web site.

So I sold it, and it was executed just before the close today. I will go now and calculate the cost/benefit analysis based on your info. In reality I may not get 5.4% over 5 years, but it should be a better deal than I could have gotten by holding and purchasing a 5 year CD in 9 months.

Thanks, again...STEVE

3

w00d00w | Dec 22, 2023 | 360 posts since 2012

this brokered CD matures in about 9 months (end Sept '24), so it should be sold near the market rate for a 9 month CD rather than 2 year CD. 5.8% offer to buy seems high, but the direct CD marketplace is offering a 9 month rate of 5.7% (NASA), so not way out of bounds.

assuming this was a direct CD instead of brokered, having a 6 month early withdrawal penalty, the cost of making this move would have been slightly over $1000. the brokered CD cost ended up being about $500 less than that.

4

sams1985 | Dec 20, 2023 | 781 posts since 2022

Steve,
I'm not sure how the CD selling process works at Merrill, but at Fidelity it shows the total depth of book on the particular CD (bid prices and and ask prices) Don't pay to much attention to the bid prices unless you're desperate to unload. They are almost always lowball offers. I usually put in a sell order with a limit price of Par or above (fill or kill) and see if anyone bites. I start high and work my down till the CD sells. I've sold 3 brokered Cd's so far and they have all sold well above the best available bid price. Since new issue 2 yr CD's are available for 4.6% currently on Fidelity, you're unlikely to get Par value. I would try a sell order for 99.5.

Although, if you're pulling and moving to Advancial, even at that bid price it's a no brainer. You'll recoup the loss within a year and then you're making $510 more a year for years 2, 3, 4 and 5. (and even more so if rates plummet next year)

Also, not sure if Merrill is free but Fidelity charges $1 per $1k CD sold so -$50 is prob baked into that bid price or they take it from the interest.

2

Steve58 | Dec 20, 2023 | 459 posts since 2018

Thanks, unfortunately Merrill only allowed me to select sell only, and not make a bid. A window popped up that says "Orders to sell this product only are permitted at this time." You can only select SELL, as the BUY and REQUEST A BID buttons are grayed out. So if I would have asked for a bid as you recommended for 99.5 on 50k, how much more would I have made as compared to accepting the latest bid which was 98.833. I think that is around $333, correct?

Again, I felt some urgency based on falling rates, believing ADVANCIAL will drop on Jan 1st. If it is a market head fake, I will be kicking myself. But thought it worth the shot.

STEVE

Steve

2

Steve58 | Dec 21, 2023 | 459 posts since 2018

Sold brokered CD at close of the market yesterday. Opened and funded the new Advancial 60 month Jumbo CD at 9:10 this morning online after depositing a personal check at a COOP branch here in AZ at 9:00. No hold on personal checks being deposited into savings account to fund a CD with them. Very slick operation and website.

Thanks to all for your input on selling the brokered CD. Much appreciate the quick responses.

Steve

2

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