3% APY for 7 year CDs

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sophie
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Re: 3% APY for 7 year CDs

Post by sophie » Fri Feb 24, 2017 7:17 am

Lots of threads about this in times past. Treasuries are absolutely safer. They are what back up CDs, after all, and the FDIC guarantee can really only work for small/limited bank defaults. This is reflected in the higher interest rates of CDs. Ain't no free lunch.

The closest thing to a free lunch is US savings bonds. I Bonds have blown away CDs in recent years. They win in interest rate, safety, and tax advantage. The current I Bond pays 2.76%, but that's state and local tax free, and tax-deferred for 30 years. Yes, rates have been in the toilet for the past year or so, but that's not a big deal over time. If you're in the market for a CD, take a look at those first.
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Desert
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Re: 3% APY for 7 year CDs

Post by Desert » Fri Feb 24, 2017 1:45 pm

Treasuries versus CD risks have been discussed endlessly on Bogleheads, and it's not clear which is safer. And the yield premium of the CD is not necessarily a risk premium. The treasury market is the most liquid market in the world. By comparison, the CD market is much less liquid, and the FDIC cap of $250K makes them impractical for institutional investors. Also, the CD rates we're talking about are not the average CD rates. These are exceptional offers put out by banks and CU's when they need to raise capital or increase customer count. So the yield premium available with CD's is better described as a liquidity premium than a risk premium.

I like I bonds as well. The only real downside is the relatively small annual investment cap.
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eufo
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Re: 3% APY for 7 year CDs

Post by eufo » Thu Apr 27, 2017 8:44 pm

Unless I'm reading things wrong... it looks like the rates are down to 2.2% APY... hope some were able to nab that 3% APY.
Don't agree with me too strongly or I'm going to change my mind
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Desert
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Re: 3% APY for 7 year CDs

Post by Desert » Fri Apr 28, 2017 10:02 am

eufo wrote:Unless I'm reading things wrong... it looks like the rates are down to 2.2% APY... hope some were able to nab that 3% APY.
Yeah, I don't think there are any 3% CD's available currently. I'm hoping to see another one pop up soon. I did max out that 7 year IRA CD though.
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