bank rates

Some Good News About Brokered CD Rates

hand catching coins falling from aboveThe substantial improvement in U.S. Treasury securities yields since May, particularly in the 5- and 10-year maturities, has lifted brokered CD rates lately.

Also, deals seem to be coming and going more rapidly – so the information below should be considered representative, not necessarily up-to-the-minute.

I’ll begin with new-issue, 5-year CDs, which I normally don’t cover, but which have become too interesting to ignore. (If you’re new to these offerings, read our brokered CD basics.)

As of July 23, the websites of Fidelity and Vanguard show the leading 5-year, new-issue CD yield to be 1.95%, at American Express Centurion Bank. (I’ve just purchased one for my Fidelity IRA.)

Discover Bank and GE Capital Bank come in second at 1.90%. CIT and Goldman Sachs Bank USA follow at 1.80%.

These yields lag the top 5-year rate of 2.05% APY shown on our CD Rates Leaderboard, courtesy of iGOBanking.com.

They also fall short of the 2.00% briefly offered during the previous week by State Bank of India (New York).

But there’s something else going on here.

The Discover, GECB and CIT rates beat, by a wide margin, the rates these banks offer for 5-year CDs opened directly.

Discover’s rate for direct 5-year CDs is 1.50% APY. GECB’s and CIT’s are each 1.60% APY. (For CDs of $100,000 or more, CIT offers 1.75% APY.)

I can’t explain this disparity.

Nevertheless, I guess half a loaf is better than none.

In the 10-year, non-callable brokered CD category (again, as of July 23), State Bank of India (New York) leads the pack with a 3.10% yield.

CIT Bank is a close second at 3.05%, while GS Bank comes in at a respectable 3.00%.

These yields far outstrip Discover Bank’s 1.90% 10-year CD, which seems to be the best 10-year CD offered directly by an online bank.

(My usual caveat: Discover direct CDs can be closed early with a 15-months’ interest penalty. Brokered CDs have no early-withdrawal feature and must be sold in the market to cash out.)

For more adventurous souls, BOKF (Oklahoma) is offering a 12-year CD with a yield of 3.30% and a 15-year CD with a yield of 3.60%.

One flaw with each, though: the CD is callable, at par, after only one year.

I haven’t found any step-rate CDs, or CDs with greater than 15-year maturities, worth mentioning.

Anyway, I’m happy that longer-term brokered CD rates have moved up with Treasury yields.

I’d like to see more of this kind of movement.

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