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LIBOR(interbank lending rate) is coming down and will continue to come down IMO. This bailout is having the intended effect and is freeing up credit markets.
Liquid interest rates have been stable despite recent rate cuts because credit markets were frozen and banks needed people deposits.
As LIBOR comes down and banks lend to each other this wont be the case.
Could be a good time to lock in a decent % CD before saving rates start to drop with the money you want to keep liquid.
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The rate only came down a little. For example the 3m dropped 7bps to 4.75%. This is still very very high.
Also where do you see interbank lending is guaranteed for the US banks?
Thats what i'm hearing that basically the Fed will have to match the Europeans guarantees. And that its being drafted as we speak.
LIBOR is going to come down even more when this happens.
Could be a good time to get into a CD if you want to stay liquid and get a decent APY as I believe savings rates will normalize downwards. Just a friendly heads up.
duncan36 said: Could be a good time to get into a CD if you want to stay liquid and get a decent APY as I believe savings rates will normalize downwards. Just a friendly heads up.
Please explain how investing in CD is staying liquid? unless you considering being locked into for a set period of time and having to pay a penalty to break that commitment being liquid.
Liquid as in cash based short term investments. Not liquid would be investing in non-safe assets like stocks and bonds. Understood?
Of course in doing so it is destroying US credit....game over and they're throwing in the kitchen sink. Next game will be which country is bankrupt???
duncan36 said:Liquid as in cash based short term investments. Not liquid would be investing in non-safe assets like stocks and bonds. Understood?
Maybe I am stilling missing something. What you are describing is "a risk free investment" as long as you are under FDIC. Risk free investments does not mean it is a liquid investment because having to forgo 2-4 months of interest which is what most bank CD's penalty to break CD's even short term CD is very punitive. Liquid investment are said to be high yield savings account or MMF's.
duncan36 said:Thats what i'm hearing that basically the Fed will have to match the Europeans guarantees. And that its being drafted as we speak.I thought I missed the annoucement. The European deal was out on Saturday. I don't understand why the libor rate didn't drop to normal levels.
Ok one mans liquid I suppose is not another man's. I consider a 6 month-1 year CD fairly liquid but you may not.
So lets say if you want to keep money out of the market and want a FDIC guaranteed cash based investment. Now may be a good time to get a CD.
duncan36 said:Ok one mans liquid I suppose is not another man's. I consider a 6 month-1 year CD fairly liquid but you may not.
Coffee -> keyboard.
For a financial planner under left on a CD 1 year is considered a cash equivalent.
soxfan1 said:For a financial planner under left on a CD 1 year is considered a cash equivalent.
Are you sure about that? Cash Management bonds are bonds with final maturities of 271 days or less which is why all short term bonds ie discount notes, commercial paper, repo's etc are issued with maturities less than 271 days and most have maturities less than 180 days. According to FASB and SEC companies can only report CD and Bonds with maturities of 271 days or less as "Cash Equivalent" on their 10-K filings. You would figure a certified "Financial Planner" would follow and abide by both SEC and FASB guidelines when advice clients.
Also "Cash Equivalent" refers to the fact they those instruments have no risk to principle and not to the fact they are liquid or illiquid as cash has no risk to principle except from inflation or currency devaluation.
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