CD Rates Disparity

CFA General
#1

I was wondering if anyone had an answer to some data that is really confusing me. I am researching short duration CD rates (past and present) and see a huge disparity in data reported by the FED and Bloomberg in reference to the current 6 month CD rate Here the FED is reporting the current 6 month CD rate is .29% http://www.federalreserve.gov/releases/h15/data/Business_day/H15_CD_M6.txt Here Bloomberg is reporting it as .92% http://www.bloomberg.com/markets/rates/keyrates.html Anyone have an explanation for why the conflicting information? Thanks.

#2

Probably because the Fed is quoting secondary market rates.

#3

It looks like the Federal Reserve data is based off of negotiable/brokered CD rates. These types of CDs offer a lower yield due to the ability to trade them in a very liquid secondary market. Bloomberg is receiving their data feed from bankrate.com which is probably showing an actual direct bank CD, the kind where you actually go to the bank and buy a CD. These are non-negotiable because there is no secondary market and you’ll be penalized if you try to redeem it early.

#4

Thanks for the clarification. Much appreciated.

#5

^^ Good explation. I would also add that there may be some discrimination based upon the credit worthiness of the issuer, averaging, market share, etc. Citi was advertising a 5 year CD on TV a little while ago that was actually yielding less than the 5 year treasury. This doesnt make any sense either.

#6

inkt2002 Wrote: ------------------------------------------------------- > I was wondering if anyone had an answer to some > data that is really confusing me. I am > researching short duration CD rates (past and > present) and see a huge disparity in data reported > by the FED and Bloomberg in reference to the > current 6 month CD rate > > Here the FED is reporting the current 6 month CD > rate is .29% > http://www.federalreserve.gov/releases/h15/data/Bu > siness_day/H15_CD_M6.txt > > Here Bloomberg is reporting it as .92% > http://www.bloomberg.com/markets/rates/keyrates.ht > ml > > Anyone have an explanation for why the conflicting > information? > Thanks. Or maybe it’s just a typo. The 9 should be after the 2.