To Compete with Spiking Treasury Yields, Banks Now Offer 4%+ on “Brokered” CDs of 6 Months to 5 Years | Wolf Street

Earning 4% without taking on credit risk would in normal times sound like a great deal. But these are not normal times, and the rate of inflation is over twice that rate. The Fed has stepped back from the markets for Treasury securities and mortgage-backed securities as part of its QT, and it has raised its short-term policy rates to over 3%. Treasury yields are now 4% or higher for maturities of one year to five years.

And banks are now having to compete with that, and are now offering “brokered” CDs at rates above 4% across maturities of six months to five years. For yield investors and savers, if they take advantage of those rates, their money is getting wiped out by inflation only half as fast as it would be wiped out in their regular bank account. But if you have to borrow money, such as to buy a house, that’s now getting a lot more expensive.

The 6-month Treasury yield today inched up to 3.9% at the moment, the highest since November 2007, up from near 0% less than a year ago:

Buying Treasury securities is now easy. People can buy them through their broker in the secondary market or sometimes at auction. And people who open an account at Treasurydirect.gov can buy them directly at auction from the government.

So I checked with my broker today. And this is what they offer in terms of brokered CDs. These are the highest bank interest rates I have seen since 2008:

  • 6-month CD: 4.04%
  • 9-month CD: 4.12%
  • 1-year CD: 4.05%
  • 2-year CD: 4.20%
  • 5-year CD: 4.30%
To Compete with Spiking Treasury Yields, Banks Now Offer 4%+ on “Brokered” CDs of 6 Months to 5 Years | Wolf Street