CD and bond rates are increasing, finally!

April 25, 2022

CD rates and bond rates are going back up now that the Federal Reserve is raising rates. So, this is a good time to get back into buying CDs and bonds using cash you don't need for short term needs.

We are seeing that the interest rates for CDs at Capital One 360 (one of our recommended banks at which to buy CDs) is currently offering 0.80% on a 1-year CD, 1.60% on a 2-year CD, and 2% on a 5-year CD. Meanwhile Capital One 360's rates on their Performance Savings Account (formerly their Money Market Savings Account) just moved back up to 0.60%. These are starting to look attractive again, though we recommend staying on the shorter time horizon because we expect rates to continue to ratchet up more. So, don't go out further than 3 years, for example. Make sure when your CD "rolls over" that you are not buying a CD that has a longer term than 2 or 3 years.

Ally Bank is another favorite of our clients. They currently are offering an 18-month CD for 1.25% at this writing (April 25th).

Meanwhile, at TD Ameritrade we can purchase CDs and individual bonds for our clients that are paying more than CDs at Capital One. The higher rates include: 1.115% for a 1-year CD, 2.663% for 2-3 year CDs, and 2.90% for 3-5 year CDs. Government and corporate bonds are paying a bit more: closer to 2% for a 1-year note, 2.7% to 3.5% in the 1-3 year range, and 2.9% to 3.5% in the 3-5 year timeframe. At TD, we typically purchase CDs and bonds in ladders so that each quarter, CDs or bonds are maturing thus form part of your "retirement paycheck." Plus we monitor rates so that we can do the heavy lifting of searching the newest and best available rates and monitor market conditions.

In addition, if you are comfortable setting up an account on the TreasuryDirect website, you can buy US Treasury Savings bonds directly from the US government. The rates on their Series I bonds are compelling (7-8%), though limitations include holding the bond at least 12 months and only buying $10,000/year per person. I just bought one for myself.

Let us know if you'd like us to pull some of your money into your TD Ameritrade brokerage account and we'll buy CDs and/or bonds for you. Otherwise, Capital One 360 is a good option for their shorter term CDs or Performance Savings. And the US Treasury's website (TreasuryDirect) for the Series I bonds could add some inflation protected bonds that are paying high rates. See our blog post on these I bonds for more information.