Since I last posted about long-term brokered CD rates in early March, I’ve monitored this market, hoping for — but not expecting — a breakthrough to the upside.
Yields on new issues having maturities of 10 or more years, offered on the websites of Fidelity, Vanguard and Incapital LLP, have improved over the last two months, but not spectacularly.
Goldman Sachs Bank USA is still the rate leader in 10-year, fixed-rate, non-callable CDs.
Its current 10-year offering yields 2.35%, up slightly from 2.30% in the first week of March.
CIT Bank’s 10-year, non-callable CD deal places a close second at 2.30%, while GE Capital Bank comes in third with 2.25%.
All these compare favorably with the 10-year CDs offered directly online by Discover Bank. The Discover rate is 1.95% APY, reflecting an across-the-board 0.05% CD rate cut two weeks ago.
(Of course, Discover’s direct CDs have the advantage of providing early-withdrawal rights, upon payment of a penalty, while brokered CDs generally may be disposed of only in the market at market prices.)
Among CDs subject to early call at the bank’s option, CIT has a 10-year maturity with a 2.40% rate (up from 2.35% in March), but providing call protection a mere six months.
The higher rates on callable, fixed-rate CDs are intended to compensate you for the dual risks of either getting the rug pulled out from under you (if rates drop) or getting stuck with a lemon (if they rise).
More intriguing is Bank of America’s 10-year “step-rate” CD, carrying an initial rate of 1.25% for two years, increasing in stages thereafter to 8% in the final six months, with an overall 2.599% yield-to-maturity.
But it’s also callable after one year.
More good news: The 10-year Constant Maturity Treasury rate has jumped this month, from 1.66% on May 1 to 1.92% on May 13.
Let’s hope that trend continues.
If you’re looking for a minimum 3% yield, you’ll have to go out much longer than 10 years.
Last week, GS Bank offered a step-rate 15-year CD, with an initial yield of 2.25% for five years and a 3.167% YTM. It’s callable after one year, though.
And, for those who want a constant rate, GS is now offering a flat 3% 15-1/2-year CD.
But you’re assured of enjoying that for only about six lunar cycles (i.e., six months). After that, the bank can call the CD.
All in all, while rates are inching up, this market still remains unexciting — and, for me at least, still unattractive.