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Brokered CD Deals Improve (Slightly)

pencil eraser pushing the plus sign on a calculatorIn December, I wrote a post headlined “Bad News About Long-Term Brokered CDs.”

Despite feelings of gloom and dread, I’ve kept my eye on this market, focusing on new-issue CDs offered through Fidelity, Vanguard and Incapital LLP.

And today, I can report that things seem a bit brighter.

First, rates for 10-year, noncallable CDs have inched up.

In early December, for example, Goldman Sachs Bank offered 10-year, call-protected CDs at a 2.15% yield. Currently, the GS 10-year, new-issue yield is 2.30%.

And another well-known bank — CIT — matches GS with a 2.30%, 10-year, noncallable deal of its own.

Another piece of good news is the gradual improvement in yields of callable 10-year CDs.

CIT sits on top with a 2.35% 10-year CD, callable after six months (its callable 10-year CD rate in December was just 2%).

BOI Federal Bank has a 10-year CD callable after three months at 2.15% (its December rate for a similar CD was 2%).

For comparison, the most visible 10-year product available directly is Discover Bank’s online CD, which continues to offer a 2% APY.

Discover CDs, unlike brokered CDs, aren’t subject to call by the bank but can be closed before maturity at the holder’s option.

Unfortunately, though, Discover will be boosting its early withdrawal penalty for these CDs, effective March 15, from nine months’ to 15 months’ interest.

Early liquidation of brokered CDs, of course, is generally subject to marketplace whims.

Long-Term Brokered CD Deals Are Getting Better (Slightly)

Brokered CDs FAQ

–FDIC-insured up to $250,000.

–Generally pay less than bank CDs.

More convenient than bank CDs?

I suppose it’s about time 10-year, brokered CD yields improved.

After all, between Dec. 3 and Feb. 25, the 10-year Constant Maturity Treasury Rate went from 1.63% to 1.88%.

(It actually reached 2.05% on Feb. 13 but has been plummeting of late, apparently because of one of those “flights to safety” that periodically crush 10-year Treasury yields.)

For those daring enough to tie up funds for more than 10 years, Wells Fargo Bank has periodically offered 15-year, “step-rate” callable CDs with yields-to-maturity exceeding 3%.

Its most recent 15-year, step-rate offering yields 2.25% the first three years, climbing to 7% in the final year, producing a 3.39% YTM. It’s callable after three years.

And, for those who would prefer a 3% yield right out of the box, there’s Chase Bank’s 20-year brokered CD, which carries that rate throughout its term, although it’s callable after two years.

All in all, I’m feeling better about long-term brokered CDs, so I think I’ll keep following them.

I’m still not buying, however.

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Comments (2)
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2 Existing Comments

  1. Charles Rechlin said:
    on March 5th at 01:12 pm

    I guess good things come to those willing to wait (a long time) for their money.
    This week’s crop of new issues include a 2.35% GS Bank non-callable 10-year CD, a 2.25% BOI CD callable after three months, and a 3.125% Wells Fargo 20-year CD callable after 2 years.
    CIT’s new non-callable 10-year CD issue remains mired at 2.30%.

  2. richard face said:
    on March 6th at 07:39 pm

    why would any1 waste their money in cds