Are you wondering why invest in certificates of deposit when rates are so low? Funny you should wonder because CD rates are finally ticking back up! In fact, both CD rates and Treasury bond yields are at the highest levels since 2007.
Higher inflation is here as we rebound from the pandemic lows. The Fed is raising interest rates multiple times as well. With risk assets like stocks and real estate slowing down, more people are looking to the safety of Certificates of Deposits, Treasury bonds, and municipal bonds to protect their wealth.
Roughly 5% of my diversified net worth is in certificates of deposit and other stable instruments currently yielding a blended rate of around 2% as of 2022. That is not a high rate. But it helps keep up with a normal level of inflation. Further, earning 2% is better than losing money during a stock market correction.
Now that CD rates and Treasury bond yields are back over 4%, it’s time to buy CDs and Treasury bonds! Finally, we can optimize our cash yields as rich central bankers look to destroy global economies to tame inflation.
Here’s a tip. There are times when the 10-year yield might be yielding less than a similar duration certificates of deposit. Look to invest in CDs to take advantage of such a spread. For example, the 10-year bond yield might yield 3.5%, while you can find 5-year CDs yielding 3.75%. This is a good opportunity to take advantage.