bank rates

Why 10-Year Brokered CDs Are Appealing

hand reaching for pile of moneyWith yields on 10-year Treasury Notes holding up against repeated assaults by the Federal Reserve and stock market pundits, long-term brokered CDs are looking more attractive to me than ever.

To me, “long-term” means brokered CDs with terms of 10 years or more.

As of Nov. 5, CIT Bank’s 10-year, non-callable brokered CD topped my list for that maturity with a yield of 3.35%.

Two affiliated banks — GE Capital Bank and GE Capital Retail Bank — tied for second, each offering a 10-year, non-callable CD at 3.30%.

Discover Bank was next, with a 3.25% 10-year, non-callable CD, which, if nothing else, provided a far better yield than the 1.90% APY in which Discover’s 10-year online CD has been mired for months.

Of course, the Discover online CD can be closed early with a 15-month interest penalty, while its 10-year brokered CD has no optional early withdrawal feature and is subject to the vagaries of the marketplace.

Also-rans in the 10-year, non-callable CD market included Goldman Sachs Bank USA and Compass Bank, each offering a 3.15% yield.

I get my deal data from the new issue CD pages of Fidelity Investments, Vanguard Brokerage and Incapital LLC.

All of these rates are well above what’s available in the 10-year Treasury market where, as of Nov. 5, the Constant Maturity Treasury yield was 2.69%.

There really hasn’t been anything appealing to me in recent weeks in the market for new-issue brokered CDs having terms greater than 10 years.

Perhaps most intriguing is a 15-year step-up CD being offered by Wells Fargo Bank.

It carries a 3.00% rate for the first four years, ultimately increasing to 6.00% in the final two years. The yield-to-maturity, by my calculation, is 3.77%.

It’s callable, but only after four years.

I’ll confess that, with the prospect of Janet Yellen taking the Fed helm, any yield over 3% — even one that requires locking myself in for a good while – is tempting.

Fortunately – or unfortunately, depending on your point of view — my plans to purchase long-term brokered CDs are regularly thwarted by shorter-term CD promotions elsewhere.

This month, PenFed’s 2.02% APY 3- and 4-year CDs will keep me away from the brokered CD market.

But I’ll continue to look at it, longingly.

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