Grab these 5% CDs while you still can


You’d better grab those fat Certificate of Deposit interest rate offers while you still can.

The biggest banking panic since 2009 has sent interest rates on Treasury bonds plummeting in a dash to safety — but for the moment, at least, you can still get much better interest from bank CDs if you shop around.

Read: Silicon Valley Bank: Here’s what happened to cause it to collapse

Ally Bank was still offering a five-year CD at 5.25% through brokerage channels Monday afternoon, though apparently not through its website (we have a call in for clarification).

The interest rate on the five-year Treasury Note? Just 3.7%.

KeyBank was offering 5% interest on a two-year CD.

The rate on two-year Treasurys: 4.1% — down a full percentage point, a staggering amount in bond terms, in a week.

And Oklahoma State Bank was paying 5.35% for one year, nearly a full percentage point more than you could get in the equivalent Treasury bonds.

All of these CDs are insured by FDIC up to $250,000.

How long these deals will remain is an open question. In the middle of last week a bank was offering 5.4% interest on a 10 year CD. That offer has long gone.

Read: ‘You don’t need a man anymore’: More single women than single men own property.

Banks can’t indefinitely pay out fat yields while interest rates are in free fall. But on the other hand right now they are desperately keen to get as many deposits as possible—for obvious reasons—and so they have a very good reason to sweeten the pot.

Their loss, your gain.

As so often, the equivalent inflation-protected Treasury bonds seem to offer a better trade-off between return and risk than the more mainstream regular Treasury bonds. Two-year TIPS bonds were still paying inflation-plus-1.8% a year, which will beat the regular Treasurys unless inflation averages less than 2.3% between now and the spring of 2025.

Five year TIPS are paying inflation-plus-1.5%: They will beat the regular Treasurys unless inflation averages less than 2.2% between now and 2028.

A key survival technique right now is to tune out the most extreme voices on either side—those urging panic and those saying “nothing to see here, move along.” 

On Friday, the airwaves were full of Wall Street salesmen assuring us that the tribulations of SVB were isolated, and specific to that bank. The regulatory actions over the weekend, and the chaos in banking stocks Monday morning, put paid to that nonsense.

The truth is, nobody knows. As a source in the financial markets put it to me Monday, how good can the regulatory stress tests for the banks be if SVB
can collapse in just 48 hours?

A panic is never a good moment in which to make major financial decisions. As we know from 2008-9, the bigger the crisis, the bigger the federal intervention.

The markets are suddenly betting on a much more dovish Federal Reserve. In a matter of days, the money markets have all but written-off the chances of an 0.5 percentage point rate hike at the Fed meeting next week. They see Jay Powell and his team starting to cut rates by the summer. And they have slashed their year-end interest rate forecast by a full 1.5 percentage points, from 5.25% to 3.75%.

Those are stunning moves in money market rates.

Whether this is yet another extreme market overreaction, to be followed in due course by a swing back in the opposite direction, remains to be seen. The crowd is no wiser than it was a week ago, and it is certainly more emotional.

But CD rates are still beating Treasurys, and look pretty good for savers who need security and stability.  




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