"Bucky" <uw_badgers[at]email.com> wrote
- quote -

Right. I have other CDs and am in fact laddered at six-month
intervals, with one step-up CD and my longer term CDs being
adjustable once. The step-up CD is from GMAC (FDIC insured)
but is callable. It's the first and last callable CD I'll
ever have! Bad choice. But, ha, it should be interesting to
watch, given the chatter from General Motors about selling
GMAC. I could have done worse, and it is stepping up pretty
nicely every year. That is until it's, um, called.

People who argue not to go out more than a year or so with
CDs seem to miss that generally, the longer the maturity,
the higher the yield. Right now some of my older CDs (with
around 3 years, tops, remaining on them) won't pay as much
as a shorter maturity new issue CD. But they paid a lot more
than shorter maturity CDs and money markets this past year.

My goal with my fixed income, low risk investments is to
stay diversified, with nothing going out more than about
five years, and remember that using 20/20 hindsight isn't a
reasonable way to assess how good one's past choices were.

Dapperdobs, what you say is helpful and rings a bell from my
anecdotal reading on the Fed's plans. I'm thinking that I
should wait a year, maybe see two more rate hikes (which
jives also with Andy's comments on short-term rates, at
least), maybe see the yield curve "uninvert," and then
adjust my CD's rate.

This past week is the first time in I think several months
that I've seen the five-year CD rates climb at the bank
where I have my CD, which may signal a trend that things are
getting a bit less crazy, re longer-term vs. shorter term
rates. The sites I am seeing with the current yield curve
contrasted against that of a month ago suggest maybe a bit
of flattening.

Andy, I follow what you're saying re the capricious of
intermediate to longer term rates right now.

I realize there are no guarantees but just 'best
guesstimates' on something like this.

Thanks, all.

Andy wrote:
- quote -

Isn't that making a choice based on prediction of long term interest
rate trends? You're predicting that interest rates will move up, so
you're keeping cash to 6-mos or less, so that you won't get stuck in
something with a low rate.

If you were truly ignoring long term interest rate trends, then you
would have fixed income at all kinds of term lengths (6 mo, 1 yr, 5 yr,
20 yr, etc).

Elle wrote:
- quote -

Here is my ignorant take on the present state of interest rates.

The short term rates seem to be driven by the Fed overnight rate, and
the Fed seems to be driven by inflation. As long as inflation holds up
in the 3-4% range look for short term rates to stay steady and maybe
rise a bit more. If inflation is higher then maybe look for even higher
short term interest rates.

Long term rates seem to be driven by strong global demand for bonds and
other conservative investments, which keeps rates down. I have no idea
what is behind this, and I haven't read any convincing theories, so who
knows how long it will last?

So, I personally would not make any choices based on predictions of
long term interest rate trends. I am keeping all my cash in 6 month
CDs and T-Bills and an EmigrantDirect account so if and when interest
rates finally move I will not be stuck in something with a low rate.

Andy

CNBC commentary seems to be running towards an additional two interest
rate hikes this year, 25 basis points each. It seems somewhat doubtful
that the Fed would lower rates at their next meeting, but watch the
comments they make, and the news commentary on their commentary, to
guage the probability of a further second hike.

Given a Certificate of Deposit with the following features:
Rate may be adjusted exactly once
Was a five-year CD at issue; has a little under four years
remaining on it
Paying 4.26% annually
Principal value is $20k
Could adjust today to most recent five-year rate, which is
5.03% annually
Maximum allowed one-time adjustment is to 6.26%

May I have anyone's thoughts on when to adjust the rate on
this CD?

I have been figuring that, with interest rates generally
trending upward, I should wait until the CD is about halfway
through its maturity for my best bet on how to maximize gain
on it.

I realize no one can say for sure where interest rates are
heading. At the moment, I think they will continue to rise
but more slowly in the next three years. Then we might see
it oscillate around a mean for awhile. OTOH, we're still
either in a yield curve inversion, or the yield curve
remains extremely flat. If anyone has reasoned speculation
on this, based on experience or a study of national
economies etc., I would be interested to read it.

The money must remain in a CD or other low risk vehicle. I
am otherwise allocated per conventional guidelines in
stocks, CDs, and emergency fund cash. No debt.