bank rates

Good Deals Can Pop Up In Brokered CDs

Nothing truly exciting ever happens in the world of brokered CDs.

There are no promotional rates, no special bump-up deals, no cash bonus awards.

But, every now and then, an exceptionally good offer catches my eye, demanding my attention.

Currently, it’s Vanguard Investments’ offering – with an October 17 settlement date – of new issue, non-callable CDs of State Bank of India-New York branch.

They’re FDIC-insured, of course.

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The rates reflect substantial premiums over rates available at Vanguard for other brokered CDs of the same maturities and over SBINY’s posted rates for comparable direct CDs.

Here are the yields to maturity at Vanguard for SBINY’s 2-, 3- and 5-year CDs, compared with the best nationally available returns on our CD Rates Leaderboard and the yields SBINY is offering on its own website.

As you can see, the 3-year and 5-year brokered CDs offer higher yields than you’ll find on our Leaderboard and all of the CDs being sold by Vanguard provide better returns than you can get directly from the bank.

Rate Comparison: State Bank of India-N.Y.

Term Yield on Vanguard Yield on Leaderboard Yield on SBINY Direct
2 Year CDs 1.25% 1.55% 1.00%
3 Year CDs 1.65% 1.51% 1.30%
5 Year CDs 2.40% 2.35% 2.05%

Such CD rate disparities involving SBINY are not unprecedented. Nevertheless, in my experience, these are unusually large.

They demonstrate two phenomena you encounter from time to time in new brokered certificates of deposit.

First, although a bank’s direct CD rates are usually higher than its brokered CD rates, sometimes the reverse is true.

In addition to SBINY, Discover Bank and Bank of Internet USA often offer longer-term brokered CDs with yields higher than those for their direct online CDs with the same maturities.

Second, occasionally you’ll find higher rates for a bank’s new-issue brokered CDs at Vanguard than at Fidelity or some other brokerage firm. I’ve seen this with brokered CDs of SBINY, Discover and CIT Bank.

The better yield for an otherwise identical CD may reflect lower concessions or commissions given or paid by those banks to Vanguard than to its competitors.

Of course, brokered CDs have their pros and cons compared with direct CDs.

But, for me, when a bank’s brokered CD yields top our Leaderboard rates, its own direct CD yields and the brokered CD yields of its competitors, they’re usually worth looking at.

By the way, in accordance with my plans to simplify my IRA portfolio, I bought one of SBINY’s 3-year CDs for my Vanguard IRA brokerage account.

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  1. Charles Rechlin said:
    on October 17th at 12:01 pm

    The best 3-year brokered CD deal I could find this week was 1.55%, American Express Bank FSB, on both Vanguard and Fidelity. It beats the Leaderboard leader by .05% (discussed in today’s post), so I bought one for my Fidelity IRA.